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Internal Control and Risk Management

Every entity exists to create value for the stakeholders and this forms the basis of risk management for every company. The challenge that faces the Board of Directors and Executive Management is in determining how much uncertainty they wish to accept in their strive for creating value. The value is maximized if the administration is successful in creating an optimal balance between growth and turnover on the one hand and the connected risks on the other.

Identifying and quantifying the risks and setting up and maintaining an efficient control mechanism is the responsibility of Recticel Group’s Board of Directors and Executive Management.

The framework for internal control and risk management applied by the Recticel Group is based on the COSO (Committee of Sponsoring Organisations of the Treadway Commission) model and is in line with the requirements imposed by the Belgian Corporate Governance Code, taking into account the Recticel Group size and specific needs.

Since mid 2010 the Board of Directors and the Executive Management have reviewed the framework for internal control and risk management and an amended Compliance programme is currently being developed and systematically implemented.

The basis will be formed by a revised Code of Conduct, applicable on all Recticel Directors, Corporate officers and employees.

These principles are further explained in the Business Control Guide, which explains them in more detail and provides more concrete guidelines, for instance guidelines on the level of Tax Management, Treasury management, Accounting policies, Investments, Purchases, Mergers and Takeovers, and such. The internal financial reporting and control occurs based on the Group Accounting Manual, Group Accounting Methodology and Cost Accounting Methodology.

This Business Control Guide includes the general delegation of deciding powers and responsibilities for specific areas of competence.

The Board of Directors and Executive Management regularly review the most important risks that the Recticel Group is exposed to and submits a list of priorities. A general description of the risks can be found in the financial part of this annual report under chapter VIII.

One of the objectives of the internal control and risk management system is also to ensure a timely, complete and accurate communication. To this end the Business Control Guide and all other guidelines contain the necessary regulations on roles and responsibilities. Also, the necessary attention is given to ensuring the security and confidentiality of the data exchange, if and when necessary.

The Recticel Group is also working on revising its internal reporting system in the event of violation of its internal or external laws and regulations.

The Audit Committee, amongst other, has the task of informing and advising the Board of Directors regarding the annual follow up of the systems of internal control and risk management.

The Recticel Group also setup an Internal Audit department that works based on an Internal Audit Charter. The Internal Audit has the primary function of delivering reports with opinions and other information on whether the internal audit is successful in meeting the pre-determined criteria. The Internal Audit aims at providing the necessary security that the Strategic objectives of the Recticel Group can be realized in the most efficient way. To this end they seek to ensure the following objectives:

- the reliability and integrity of the information;
- compliance with policies, plans, procedures, laws and agreements;
- safeguarding of assets;
- economical and efficient use of resources;
- achieving the goals set by operations and programs.