In control statement
FMO has internal risk management and control systems that enable us to take risks and control them and that are based on international best practices.
Adequate internal risk management and control systems strongly support the attainment of objectives in the following categories:
Realization of strategic and business objectives;
Effectiveness and efficiency of processes;
Reliability of financial reporting; and
Compliance with laws and regulations.
The Management Board regularly considers the design and effectiveness of FMO’s internal risk management and control systems (taking into account the approved risk appetite) and discusses all related significant aspects with senior management. The results of the Management Board’s monitoring of FMO’s internal risk management and control system – including significant changes and planned major improvements – and the defined risk appetite are discussed with FMO’s Audit & Risk Committee, which reports these to the Supervisory Board.
Based on our monitoring of the company’s internal risk management and control systems, and cognizant of their inherent limitations described below, we have concluded that FMO is in compliance with the requirements of best practices 1.4.2 and 1.4.3 of the Dutch Corporate Governance Code. The Management Board makes the following statement:
As Management Board of FMO, we are accountable for internal risk management and control systems within FMO.
Based upon our assessment of the internal risk management and control systems of FMO and barring unforeseen adverse external and internal conditions, we are of the opinion that:
The annual report provides sufficient insights into failings in the eﬀectiveness of the internal risk management and control systems;
The afore mentioned systems provide reasonable assurance that the financial reporting does not contain any material inaccuracies;
Based on the current state of aﬀairs, as explained in the Financial Performance paragraph, it is justified that the financial reporting is prepared on a going concern basis; and
The report states those material risks and uncertainties that are relevant to the expectation of the company’s continuity for the period of twelve months after the preparation of the report.
These statements are based on our knowledge and belief that:
FMO has a proper system of internal risk management and control relating to strategic, operational, compliance and reporting risk;
FMO has identified key risks and material control measures and evaluated the operating effectiveness of these material control measures;
We have provided sufficient insights into failings in the eﬀectiveness of the internal risk management and control systems, as well as the appropriate corrective actions, and we are committed to implement such corrective actions.
Reference is also made to the Risk management framework section in the Corporate Governance paragraph and the Risk Management section for an explanation on FMO’s risk management framework, which is organized in adherence to the three lines of defence principle.
We note that the proper design and implementation of internal risk management and control systems significantly reduces, but cannot fully eliminate, the possibility of poor judgment in decision-making, human error, control processes being deliberately circumvented by employees or others, management overriding controls, or the occurrence of unforeseeable circumstances.
Another limiting factor is the need to consider the relative costs and benefits of risk responses. Properly designed and implemented internal risk management and control systems will therefore provide reasonable, but not absolute, assurance that FMO will not be hindered in achieving its business objectives, or in the orderly and legitimate conduct of its business.
Regarding internal risk management and control systems the Management Board has identified the following areas of improvement. These are actively managed:
Current and upcoming regulations put pressure on FMO and require significant attention and effort from its resources. New and changed regulations are being monitored by the Financial Regulation Committee.
To further improve the operational effectiveness and efficiency of FMO and at the same time deliver on the strategic objectives, FMO has identified several projects and changes. In order to mitigate the resulting execution risk, a new governance framework on managing the project portfolio has been implemented by the Management Board.
Data quality issues remain an attention point, although some data quality improvements have been realized. In order to further improve the accessibility, consistency, granularity and quality of risk & finance data, an Information Management Program has been put in place to further mitigate this risk.
FMO is in the process of further strengthening its process management capability and internal control framework for front-to-end processes. Establishment of a Business Process Management function and an increase of the level of maturity of internal controls is put on the 2019 agenda.
FMO is in the process of digitalizing and automating, which may involve the use of cloud solutions and portals. These changes to our ICT systems and information integration will require increases in the level of security and monitoring.
A Financial Economic Crime enhancement plan has been initiated to further improve our control around Client Due Diligence.
We have committed to ensuring, to the best of our abilities, that this report was prepared and is presented in accordance with the Integrated Reporting framework and that the integrity of all information presented can be assured.
In accordance with article 5:25c sub 2 part c of the Dutch Financial Supervision Act (Wft), we state that, to the best of our knowledge:
The annual accounts give a true and fair view of the assets, liabilities, financial position and profits of FMO and its consolidated companies;
The annual report gives a true and fair view of the position on the balance sheet date and developments during the 2018 financial year of FMO and its consolidated companies; and
The annual report describes the material risks that FMO faces.
The Hague, March 14, 2019