A description of the main features of the internal control and risk management systems pertaining to the financial reporting process

General

Kemira’s Board of Directors defines the main principles of risk management and approves the Group’s risk management policy. The business segments and functions are responsible for identifying, assessing and managing risks involved in their activities. The Group’s Risk Management function coordinates and supports risk management.

Kemira’s internal control system covers all Group operations, including financial reporting. The internal control activities are carried out in all organizational levels as part of the Group’s daily operations.

A more detailed description of risks and risk management can be found in the Annual Report's Risk Management section and also on the Company’s website. A general description of Kemira’s internal control system can be found under the heading Internal Control.

The following describes how Kemira’s risk management and internal control work in connection with the financial reporting process to ensure that the financial reports published by the Company give essentially correct information of the Company’s financial situation.

Roles and Responsibilities

Kemira’s Board of Directors ensures that the Company has sufficient resources for risk management and control, and that the control has been arranged appropriately and that the financial statements provide correct and sufficient information of the Company. The Board of Directors is assisted by the Audit Committee in these tasks.

The Managing Director handles the Company’s everyday management in accordance with instructions and regulations from the Board of Directors. The Managing Director is responsible for the Company accounting being lawful and that assets are managed reliably.

The Group’s CFO is responsible for the general control system of financial reporting. The areas of responsibility between financial administration of the Group, regions and segments have been defined precisely. Group level financial functions support, monitor, instruct and offer training to the financial organizations of the regions and segments. Group level financial functions are also responsible for the Group’s internal financial reporting and support Segment Controllers in analyzing business processes. Financial organization in the regions is responsible for the functionality of the financial functions’ processes and correctness of figures in their region. Controlling in segments operates under the segments’ business management and analyzes the business processes.

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The Group’s IT function has a significant role both in financial reporting and internal control, as reporting and many control measures, such as process monitoring are based on IT solutions.

The Internal Audit function including its tasks and areas of responsibility are described more specifically under the heading Internal Audit.

Risk Management

The Group’s financial administration is responsible for managing risks related to financial reporting. The risks are identified, assessed and managed in connection with the Group’s general risk management process and separately as part of financial administration’s own operating processes. The Kemira Business Control Manual compiled and maintained by the Internal Audit function is utilized when recognizing risks.

The Group’s financial administration assesses each risk it has recognized related to financial reporting. In its risk analysis, financial administration defines to which function or process each risk is related and how the risk would affect the Group’s financial reporting if it was to materialize.

The risk assessment is documented and made available to the persons concerned. The Group’s financial administration is responsible for risk documentation being comprehensive and up-to-date and that the risks are reassessed annually in connection with the Group’s strategy process.

Financial Reporting and Control

Kemira follows uniform accounting and reporting principles based on the International Financial Reporting Standards (IFRS) in all its units. Kemira Group policies and Financial Manual define in detail the processes of accounting and financial reporting to be applied in all Group companies. The purpose of the policies and Financial Manual is to ensure the reliability of financial reporting.

The Group has a global Enterprise Resources Planning (ERP) system that ensures fast and reliable communication. Subsidiaries report their figures from the ERP system to the Group, using a uniform Group reporting system. The financial organizations of the Group, segments and regions check the correctness of the figures in the Group reporting system in accordance with the responsibility areas described above.

Proper control of financial administration, financial reporting and accounting processes is a basic requirement for the reliability of financial reporting. The Group financial administration determines the appropriate control functions, the objectives of each control function and how the effectiveness of the control functions is monitored and checked based on a risk analysis it performs. The control functions are described in the above mentioned risk documentation and financial administration is responsible for their practical implementation.

Financial reporting control is performed either continuously as part of the transactions of the company’s monitoring processes such as purchasing and sales processes, or alternatively monthly or annually as part of the reporting process.


Communication

The personnel of Kemira’s financial administration regularly arranges internal meetings and trainings for different personnel groups and exchanges information and experiences concerning for instance reporting and monitoring practices in connection with these meetings. The main instructions and regulations concerning financial reporting, internal control and risk management are available to all employees on the Company intranet.

Monitoring

The functionality of internal control, risk management and reporting systems is constantly monitored as part of daily management of the Company. Each segment, function and region is responsible for implementing internal control, its efficiency and reliability of reporting within their area of responsibility. The Group financial administration monitors the functionality and reliability of the financial reporting process at Group level. The financial reporting processes are also monitored by the Internal Audit function.