Principle 7

RECOGNISE AND MANAGE RISK

Oversight of the risk management system

The Board oversees the establishment, implementation and annual review of the Company’s

risk management system. Management has established and implemented the risk management system

for identifying, assessing, monitoring and managing operational, financial reporting, and compliance

risks for the Company. The Chief Executive Officer and the Chief Financial Officer / Company

Secretary have declared, in writing to the Board, that the financial reporting risk management

and associated compliance and controls have been assessed and found to be operating efficiently

and effectively. All risk assessments covered the whole financial year and the period up to the signing

of the annual financial report for all material operations in the Company and material associates.

Risk profile and the Audit Committee

The Audit Committee reports to the Board on the status of risks through integrated risk

management processes and programs aimed at ensuring that risks are identified, assessed

and appropriately managed.   

Each business operational unit is responsible and accountable for implementing and managing

the standards required by the risk management system.

The major risks that the Company faces are allocated to individual executives and are reviewed

to determine progress and to provide updates as to the individual status and to ensure the

identification of any further risks.

Risk management and compliance and control

The Company has implemented a compliance program which complies with the Australian Standard

for Compliance programs AS 3806. This Standard was prepared by the Standards Australia

Committee following a request by the Australian Competition and Consumer Commission and details

the essential elements of an effective compliance program. The Standard provides principles for

the development, implementation and maintenance of an effective compliance program,

whilst emphasizing the need for continuous improvement. The use of these principles will enable

the Company to identify risks and to develop processes to ensure compliance with relevant laws

and regulations, including gaming regulatory and licence obligations.

The Company received accreditation on 15 June 2007 confirming that the Company’s quality

management system complies with the AS/NZ ISO 9001:2000 standard. This quality standard is

identical and has been reproduced from the ISO 9001:2000, Quality Management System

Requirements published by the International Organization for Standardization (ISO). Further to

receiving the accreditation, the Company has demonstrated its ongoing commitment to continuous improvement by successfully maintaining its quality accreditation through regular independent surveillance audits of its quality management system during the year.  

In addition to the above, the Company continually reviews internal controls and operating procedures

to enable compliance with Gaming Machine National Standards and the Company's Control System

Manual.

To ensure that these standards are maintained, there are a number of internal reporting measures

including monthly Compliance Reports from all department managers and monthly Continuous

Disclosure Reports from all senior executives. The Regulatory and Compliance Committee receives

details from the above reports and reviews the Company’s reporting and processes on all these

matters.

The Board is responsible for the overall internal control framework, but recognizes that no cost

effective internal control system will preclude all errors and irregularities.  The Board’s policy on

internal control is continually under review to ensure it keeps pace with internal and external

changes. The Board overviews the Company’s internal compliance and control systems, including:

• Operating unit controls - Operating units confirm compliance with financial controls and

procedures, including information systems controls detailed in procedures manuals;

• Functional specialty reporting - Key areas subject to regular reporting to the Board include

Treasury and Risk Management, Environmental, Legal and Insurance matters; and

• Investment appraisal - Guidelines for capital expenditure include annual budgets, detailed

appraisal and review procedures, levels of authority and due diligence requirements where businesses

are being acquired or divested.

Comprehensive practices have been established to ensure:

• capital expenditure and revenue commitments above a certain size, obtain prior Board approval;

• occupational health and safety standards and management systems are monitored and reviewed

to achieve high standards of performance and compliance with regulations;

• business transactions are properly authorized and executed;

• the quality and integrity of personnel is maintained (see below);

• financial reporting accuracy and compliance with the financial reporting regulatory framework

(see below); and

• environmental regulation compliance (see below).

Quality and integrity of personnel

Written confirmation of compliance with policies of the Company is obtained from all operating

units. Formal appraisals are conducted at least annually for all employees.  Training and development

and appropriate remuneration and incentives with regular performance reviews create an environment

of co-operation and constructive dialogue with employees and senior management.  A formal

succession plan is currently being established to ensure competent and knowledgeable employees

fill senior positions as and when retirements or resignations occur.

Financial reporting

The Chief Executive Officer and the Chief Financial Officer / Company Secretary have declared, in

writing to the Board, that the Company’s financial reports are founded on a sound system of risk

management and internal compliance and control. Monthly actual results are reported against budgets

approved by the directors and revised forecasts for the year are prepared regularly.  

Environmental regulation

The Company’s operations are not subject to significant environmental regulations under either

Commonwealth or State legislation. The Board believes that the Company has adequate systems in

place for the management of its environmental requirements and is not aware of any breaches of

those environmental requirements as they apply to the Company.

Assessment of effectiveness of risk management

Internal Audit

To further assist the Board in ensuring compliance with these internal controls and risk management

programs, the Company allocated the responsibilities of the Internal Audit function to a key employee

within the Company’s compliance department. This role is to oversee and regularly review the

effectiveness of the abovementioned compliance and control systems and conduct regular audits

against the International and Australian Standards as well as against all operating policies and

procedures. The Audit Committee is responsible for approving the internal audit plan to be under-

taken during the year and for the scope of the work to be performed.