Risk Management

 

4.1 Enterprise Risk Management

Risk Management is a critical oversight responsibility of the Board. The Group uses an Enterprise Risk Management approach to identify, evaluate, address, monitor, quantify and report material business risks to the Risk Management and Audit Committee. The objective of this approach is to enhance stakeholder value through continuous improvement in the Group’s management of risk. The Group’s Corporate Risk Management is led by the Group Head of Risk and Insurance. Corporate Risk Management liaises with regional CEOs and risk specialists on both business specific and enterprise-wide risks. Corporate Risk Management’s objective is to assist the Group’s businesses to further develop their risk management processes. Its role includes: 

  • advising on and implementing risk treatment strategies at Group level; 
  • assisting management to embed Enterprise Risk Management; 
  • assisting Group businesses to implement and maintain effective risk management practices; 
  • maintaining effective early warning reporting systems; and, 
  • consolidating information for presentation to the Risk Management and Audit Committee.

4.2 Risk Management Reporting 

Management is responsible for keeping the Board’s Risk Management and Audit Committee informed on a regular basis of material business risks. In the reporting period, the Committee has received regular reports on material risks facing Lend Lease businesses worldwide and management has reported to the Board as to the effectiveness of Lend Lease’s management of its known material business risks.

Lend Lease uses an online risk matrix to report and monitor risks in the following categories: 

  • Financial
  • Legal/Regulatory
  • Health & Safety
  • Performance
  • Environment & Community
  • People 
  • Property/Business Continuity
  • Information Technology

The categorisation drives functional accountability for managing the primary cause or consequence of the risk noting that all risks may impact our reputation or have a secondary effect.

The risk matrix defines the risk tolerance of Lend Lease by setting thresholds for impact and likelihood and defining the material business risks required to be reported to the Board.

Lend Lease also has an Internal Audit function to provide Financial, Operational and Environment, Health & Safety assurance. The Group Head of Internal Audit reports to the Risk Management and Audit Committee as well as to the Group Chief Financial Officer and is independent from the external auditor. 

4.3 Key Risk Management Practices 

Operational businesses are responsible for risk management outcomes and implementing self-assurance programs to assess the effectiveness of risk management procedures. Formal internal and external audit procedures are utilised to provide supplementary assurance. The Group uses sensitivity analysis and risk modelling to identify the most important assumptions affecting the delivery of the Group’s business plans. Project Control Groups are set up as required to focus attention on particular risks. 

The Group’s approach to risk management is guided by the International Standard on Risk Management, ISO 31000 on Risk Management.

4.4 Key Policies 

In addition to Board delegated Limits of Authority a number of key specific policies govern the way Lend Lease conducts its business and manages material business risks. These policies (including the Risk Management Policy) are available at the corporate governance area of the Lend Lease website at www.lendlease.com.

4.5 Integrity in Financial Reporting, Risk Management and Internal Control

The Group CEO and the Chief Financial Officer have declared in writing to the Board that, for the year ended 30 June 2013:

With regard to the Financial Reports of the consolidated entity comprising Lend Lease Corporation Limited and its controlled entities including Lend Lease Trust (together referred to as the ‘Consolidated Entity’) for the year ending 30 June 2013:

    1. The Consolidated Entity’s financial records have been properly maintained in accordance with Section 286 of the Corporations Act; and
    2. The Consolidated Entity’s financial statements and notes required by the Accounting Standards give a true and fair view of the Consolidated Entity’s financial position and performance and comply with Australian Accounting Standards.

With regard to the risk management and internal compliance and control systems of the Consolidated Entity for the year ended 30 June 2013, the declarations made in 1 and 2 above with respect to the integrity of the Consolidated Entity’s Financial Reports for the year ended 30 June 2013 are founded on a sound system of risk management and internal control and the system is operating effectively in all material respects in relation to financial reporting risks.

Since 30 June 2013, nothing has come to the attention of the Group CEO or the Chief Financial Officer that would indicate any material change to any of the statements made above.

The Group’s senior management has also reported to the Board of Lend Lease on the effectiveness of the management of material business risks for the year ended 30 June 2013. 

4.6 External Auditor

KPMG is the external auditor of Lend Lease and its controlled entities. In April 2013, the Board commenced a tender process for the role of external auditor for the Group. A thorough process was undertaken, including the appointment of former ASIC Chairman Alan Cameron, AO as Probity Officer to oversee its robustness and independence. At the conclusion of the audit tender process in July 2013, it was announced that KPMG would continue as the Group’s external auditor. 

In considering retaining KPMG as the existing auditor, an appropriate balance was required between ensuring audit independence and maximising audit quality. The Group is a large listed company, operating in a complex environment with complex business structures and operating models. KPMG has invested significant time and effort to understand the Group’s operations and the cumulative knowledge of Lend Lease obtained by KPMG over many years cannot be underestimated.

Performance Management

The Risk Management and Audit Committee has the responsibility to oversee and appraise the quality and effectiveness of the audits conducted by the external auditor. The external auditor attends each meeting of the Committee and at every meeting, time is set aside so that the committee can meet with the external auditor without management present. The Committee Chairman meets with the external auditor at least quarterly, also in the absence of management. 

Selection, Appointment and Rotation

The Risk Management and Audit Committee is responsible for making recommendations to the Board as to the selection, re-appointment or replacement of the auditor and the rotation of the lead audit partner. The lead partner is rotated every five years. The current audit engagement partner is Stuart Marshall who was appointed with effect from 1 July 2011. 

Provision of Non Audit and Other Services

Lend Lease has a comprehensive policy to ensure that services provided by the external auditor do not impact or have the potential to impact upon their independence. All non audit services need to be approved by both the Chairman of the Risk Management and Audit Committee and the KPMG lead partner to ensure that the proposed arrangement does not, or will not be viewed as compromising KPMG’s independence.

Under the terms of the policy the auditor should be appointed for other service engagements only where it is best suited to undertake the work. The policy further provides that the auditor should not provide services having the potential to impair the independence of its role. Generally these include the following services:

  • Bookkeeping, preparation of, and other services in relation to, accounting records and financial statements;
  • Design and implementation of financial information systems or financial controls;
  • Valuation services, appraisals or fairness opinions, where the results are material to the financial statements or where the external auditor would be required to audit those statements or opinions;
  • Outsourced internal audit services;
  • Secondments;
  • Recruitment and other human resources services, including international assignee services;
  • Actuarial services;
  • Management functions;
  • Legal services;
  • Taxation advice of a strategic or tax planning nature;
  • Broker-dealer, investment advisor or investment banking services;
  • Work that is remunerated through a “success fee” structure;
  • Expert services unrelated to the audit; and,
  • Work that involves the auditor acting in an advocacy role for the Group.

The Chief Financial Officer and the auditor are each required to provide a statement that the non audit assignment will not impair the auditor’s independence. During the year KPMG, the Company’s auditor, performed certain other assurance services in addition to its statutory duties. The Board has considered the other assurance services provided during the year by the auditor and, in accordance with written advice provided by resolution of the Risk Management and Audit Committee, is satisfied that the provision of those assurance services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

  • All other assurance services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the Risk Management and Audit Committee to ensure they do not impact the integrity and objectivity of the auditor; and
  • The other assurance services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.
  • Apart from conducting the external audit of the Group and undertaking other assurance services, KMPG were not retained to undertake any other assignments of any kind for the Group.

Auditor’s Independence

The external auditor is required to provide to Lend Lease a written declaration that, to the best of the auditor’s knowledge and belief, there have been no contraventions of the auditor independence requirements set out in the Corporations Act or any applicable code of professional conduct in relation to the conduct of the audit.

A copy of the Lead Auditor’s Independence Declaration  as required under section 307C of the Corporations Act has been included in the Directors’ Report. 

Fees

Fees paid to the auditor during the financial year are detailed in the Directors’ Report .

Attendance at Annual General Meeting

The external auditor is required to attend the AGM and be available to answer any questions on the conduct of any audits and the preparation and content of the auditor’s report.