LISI GROUP - 2018 Financial report

80 / 171

Internal audit repository
The Internal Control Department developed a new Internal Audit
Repository in 2011 based on a Questionnaire of 134 questions that cover
all of the Internal Control Manual processes: Purchasing, Capital
Expenditures, Sales, Inventories, Cash, and Human Resources.
In 2015, this questionnaire was reviewed in order to improve internal
control standards. Accordingly, an additional process comprising 24
questionswas introducedforthecontrolofourITsystems.Itwasrevised
in October 2017 in coordination with the IT Departments of the three
divisions. The number of questions was reduced to 22.
Audits have been used since 2012 to validate (or invalidate) the level of
internalauditachieved ineachofthebusinessunits;theyhavecontinued
throughout the whole of 2018 with 15 audit tasks completed.
The Group’s overall score level was 81%, above our contractual minimum
of 80%.
We feel that the stiffening of the internal control requirements caused a
loss of about 5 points on the scores achieved in 2018, while the impact of
the Chapter “Information Systems” would be approximately 1 point.
Amore detailed analysis by division shows that:
■■The LISI AEROSPACE score fell 3 points to 79%;
■■TheLISI AUTOMOTIVE score fell 4points, but at 81%, remains above the
required level;
■■TheLISIMEDICALscorealsofell2pointsbut,at84%,remainsabovethe
required level.
Furthermore, a process-level analysis shows that, with the exception of
the “InformationSystems” cycle, all the other processes are close to or
above our contractual standard of 80%.
Special work took place in 2018 following the acquisition of TERMAX: its
aim was to determine the level of internal control. This support work
enabled operational teams to prepare their roadmaps to attain the level
of internal control required by 2021.
Lastly,in2018,theInternalAuditDepartmentcontinueditsgoodpractices
efforts through the promotion of ICCs (Internal Control Committees).
These committees bring together the internal control referents in the
divisions. This work pools operational and financial internal control
compliance ideas, resulting inGroupprocedures being updated: they are
adapted in response to changes inprocesses and are designed to reduce
the risks detected during the audits. This dynamic of continued
improvement will continue in 2019.
Risk mapping
■■Themain risks identified under themedium-termbudget and strategic
plan fall under several areas of action:
1. Market risks to be anticipated as accurately as possible within all
divisions
a. Possible effects of over-stocking based on the current contracts,
b. Flexibility to be ensured to cope withmajor temporary crises,
c. Absorption of fixed costs to offset the effects of the fall in
industrial markets,
d. Industrial activities for which the panel of players remains
restricted and highly competitive.
2. Industrial challenges
a. Essential productivity programs to be carried out to sustain
certain industrialprocessesandmaintaincompetitiveness inhigh
cost areas, sometimes accompanied by reconversion in themore
attractive segments of the business,
b. Technology challenges key to remaining competitive,
c. Customer requirements that are increasingly difficult tomeet.
3. Risks of securing assets detected on some sites: flooding, fire
detection and fire prevention, for which site relocation projects are
under study and or underway.
Fraud
The LISI Group is a regular target of fraud attempts. Most of these are by
identity theft, but new attempts were identified in 2018, such as fraud
attempts by false invoices, falsifications of electronic or paper checks
fraud via changes to bank details. Thewhistleblowing procedure in place
since2013isstillactiveandadviceisprovidedaboutthecorrectbehaviors
to adopt. It is also circulated if necessary more widely depending on the
declared attempts. A communication plan has been prepared in
partnership with the Group Head of Information Systems Departments:
this plan, to be rolled out in 2019, aims to raise awareness and warn all
users of the dangers of cybercrime and fraud.
CONCLUSION
The Group finds the standard of internal audit appropriate to the size and
typology of the risks identified.
In 2019, LISI will focus on continuing its internal control strategy to:
■■Respond to theGroup’s growth and bring all Group entities into linewith
the COS (Controlling Operating System) and audit standards as quickly
as possible;
■■Raise the internal audit ratings of sites whose scores are below the
Group standard of 80%;
■■Manage the risks approach using a standard methodology, and
harmonize its process with all of the strategic and operational action
plans,
■■Continue its compliance drive in areas linked to CSR issues (see Chap.6
of the Annual Report).
Supplier and customer terms of payment
In the tables below, you will find details of the terms of payment for
suppliers and customers concerning LISI S.A. operating invoices: