Basic Element's Board of Directors has stated that establishing an effective system of corporate governance is one of the most important tasks for the further development of the Company. As part of this task, key areas have been identified which can be applied to all of Basic Element's businesses and include:
- building a modern risk management system;
- improving the internal audit function;
- improving the effectiveness of Boards of Directors at the holding's companies, including by setting up Audit Committees as part of the Boards of Directors.
To address these problems, in April 2007 Basic Element set up a Department of Corporate Governance and Internal Control, whose tasks include coordinating all projects to improve the corporate governance system at all the holding's companies.
As a methodological basis of the risk management system, Basic Element chose the widely accepted model COSO Enterprise Risk Management, which allows the implementation of a comprehensive risk management system across the holding at all levels of management and for all groups of risks inherent in our business activities. At the moment, the risk management system is being introduced at all the Group's companies, which will allow the Boards of Directors and managers at all levels to receive information regularly and in good time about the most significant risks of the holding's activities and measures to manage these risks.
The internal audit function was established at Basic Element's business a few years ago, but as part of the improvement of the corporate governance system its scope has been widened considerably and brought into line with international standards of internal auditing. Basic Element has now created 15 independent internal audit services employing more than 100 professional internal auditors at its companies and sectors and has plans to increase the number of auditors by one and a half times in the near future. All services are functionally subordinate to the Audit Committees of the Boards of Directors, which ensures their independence and objectivity when they are evaluating the internal control system and making recommendations to improve the operating efficiency of the holding's companies.
However, none of the above projects would have achieved any results without the creation of effective and qualified Boards of Directors and of specialised committees at the Boards of Directors at all the Group's companies. In order to fulfil this task, Audit Committees were set up at all the holding's companies with responsibility for in-depth review of internal controls, risk management, financial reporting and internal audit within the purview of the Board of Directors. Furthermore, in order to improve the effectiveness of the Committees, their meetings have been increased to one a month, which allows for ongoing monitoring of all issues under the purview of the Committees.
Basic Element is also working to improve its corporate governance system in another important area, that of ensuring the effective implementation of ethical principles at all the holding's companies. Basic Element has therefore revised its corporate Code of Ethics and introduced detailed ethical standards for the Company's employees which explain the practical aspects of applying our ethical principles in everyone's daily activities. Commissioners for ethics have been appointed at all the holding's companies and are responsible for the introduction and promotion of ethical principles, as well as for the timely consideration of any requests for clarification from staff or breaches of the Code. The Commissioner on Ethics also has the right to make direct appeals to the Audit Committee of the Board of Directors, which allows even the most complex ethical issues to be addressed and resolved effectively.
