Internal control and risk management in Biotie
Internal control is a process effected by the Board of Directors, management and all levels of personnel in the Group.
The aim of the internal control framework in Biotie is to ensure that:
• operations are managed effectively and efficiently, as well as being aligned with the Company’s strategy;
• financial reporting and management information are reliable, complete and timely; and
• all Group companies are in compliance with all applicable laws and regulations.
Enterprise risk management in Biotie is a continuous process. It is integrated in the Group’s strategy setting process, operational planning, daily decision making and monitoring of its operations. As such, it is also part of the Company’s internal control environment.
Moreover, risk management is an integral part of the Group’s management, monitoring and reporting systems. Regular reporting and monitoring is performed both at the Group and local company levels. The Board of Directors approves the risk management policy and objectives. It guides and monitors the planning and implementation of risk management.
The Group management holds the highest operational responsibility for the implementation of the risk management policy. The Group management is responsible for organisation and the planning, implementation, development, coordination and monitoring of risk management policies as approved and implemented by the Board of Directors.
Main features of the internal control and risk management systems pertaining to the financial reporting process
Internal control and risk management systems in relation to the financial reporting process are a part of the Group’s overall internal control and risk management framework. Systems are designed to provide reasonable assurance of the reliability of financial reporting and the preparation of financial statements in accordance with applicable laws and regulations, generally accepted accounting principles and other requirements concerning listed companies.
The Board of Directors is ultimately responsible for the appropriate arrangement of the control of the Company accounts and finances, as well as overseeing of the accounting and financial reporting process, monitoring the financial reporting (such as financial statements and interim reports), and review of internal control procedures.
The Managing Director is responsible for the implementation of internal control and risk management processes and ensuring their operational effectiveness. The Managing Director is also responsible for ensuring that the Group’s accounting practices comply with the law and that financial matters are handled in a reliable manner.
The Group’s management assigns responsibility for the establishment of more specific internal control policies and procedures to appropriate responsible personnel responsible. Management and employees are assigned with appropriate levels of authority and responsibility to facilitate effective internal control over financial reporting.
Separate internal audit assignments may be initiated by the Board or the Management as deemed necessary. The scope and frequency of separate audits depend primarily on the assessment of risks and the effectiveness of ongoing monitoring procedures. Internal control deficiencies are reported upstream, with serious matters reported to management and the Board of Directors.
Biotie applies IFRS standards to its consolidated financial statements and follows the standards and regulations set by Nasdaq Helsinki Ltd, the Finnish Financial Supervisory Authority, NASDAQ and the US SEC. The Company’s financial reporting complies with the Finnish Securities Markets Act, the Companies Act, the Exchange Act and the US Securities Act of 1933 and the rules and regulations thereunder (the US Securities Act and, together with the Exchange Act, the US Securities Laws). The financial statements of the parent company are prepared in accordance with the laws and regulations governing the preparation of the financial statements in Finland.
Biotie has established objectives for reliable financial reporting in order to identify financial reporting risks. The Group has an integrated risk management process which is a part of the Group’s management, monitoring and reporting systems. Regular reporting and monitoring is performed both at the Group and single Company level. The identification of risks and preparations for them is primarily carried out in the finance and administration unit.
Risk management procedures cover the identification and assessment of the risks that may arise in different levels of the financial reporting process. Risk identification and assessment is continual, meaning that the assessment is updated on a continuous basis through taking into account changes in the business environment and in the operation of the corporation.
The monitoring and follow-up of internal control systems is conducted to ensure that the financial information is reliable, complete and timely for the decision making and that internal control is operating efficiently.
Control activities are linked to risk assessment and specific actions are taken to address risks to the achievement of financial reporting objectives. The identified risks related to financial reporting are managed through control activities that are set throughout the organisation, at all levels and in all functions. In financial reporting, Group Finance assists the single companies in setting up adequate control activities such as approvals, authorizations, verifications, reconciliations, reviews of operating performance, safeguarding of assets and segregation of duties. The Board of Directors is ultimately responsible for ensuring that external financial reporting is correct, timely and in compliance with applicable regulations.
In 2015, Biotie has continued to develop the key controls that aim to respond the financial reporting risks identified in the risk assessment process. The objective of these control activities is that a reasonable assurance can be reached to make sure that the financial reporting of the Group is accurate, timely and complete. The identified common controls are implemented at Group and unit level. The focus has also been on follow-up of the adequacy and effectiveness of control activities.
The local companies report the results on a monthly basis to the Parent Company and it is responsible for preparing the consolidated financial statements and monitoring the performance of the Group at a consolidated level.
In Biotie, monitoring has been embedded in the work performed by the Board of Directors, Managing Director and group management. Monitoring includes analyzing the monthly, quarterly and annual performance of the Company at the various levels of the organisation as well as reviews and procedures.
In addition, following the listing in the United States, Biotie has established a Disclosure Committee, which is responsible for reviewing all financial, and certain other, releases to ensure proper and full disclosure is made.
Short-term risks and uncertainties
Risk factors that could affect the company have been described in the Q1 2016 report, published May 12, 2016.
25 May, 2016