Strengthening of the internal control and risk management system, and of the corporate governance and business management system

The gradual changes in Saipem’s risk profile and the consequent modifications made to the Company’s system of internal controls reflect the characteristics and complexity of Saipem’s business activities. In 2012 and 2013, the Risk and Control Committee, together with the Board of Statutory Auditors, commissioned a review by an independent consultant of the structure in place for oversight of the Saipem Internal Control and Risk Management System in terms of compliance with the Corporate Governance Code.
The review showed that the oversight structure adopted by Saipem is in line with the provisions of the Code in relation to internal control and risk management requirements. In order to improve the internal control and risk management system and corporate governance, several changes were made during 2013. The main changes made and their objectives were as follows:

  • Strengthening of the Risk and Internal Control Management System through the review of processes of risk management and the creation of organisational structures and committees.
  • Strengthening of the system of internal powers and responsibilities, with the procedures governing the system updated on the basis of a review of the processes used to assign powers and designate process owners for the Company, its overseas branches and its subsidiaries.
  • Reorganisation and reshuffling in a number of managerial departments.

The following committees were created in order to enhance the Company’s governance system and to ensure adequate controls over critical and/or significant activities and contents:

  • The Executive Committee, composed of Saipem Top Managers, whose objective is to advise the Chief Executive Officer on the steering, coordination and control of key business decisions and relevant or critical aspects (e.g. reviews of business operating performance or the Company’s economic and financial performance).
  • The Risk Committee, responsible for providing opinions concerning the design of the Internal Control and Risk Management System and advising in terms of identifying the main risks the Company faces.
  • The Regulatory System Compliance Committee and the Regulatory System Technical Committee, whose job it is to verify systematically that the Company’s regulatory systems are consistent with the compliance and governance models.
  • The Crisis Committee, established in order to guarantee coordinated and integrated management of all operative and environmental crisis situations that could significantly impact on Saipem’s activities, on employee health and safety and on the environment.

As part of the process of improving governance, additional organisational initiatives were implemented to strengthen the Internal Control and Risk Management System, including a review of the Regulatory System and the System of Internal Powers. In relation to the former, the relevant Management System Guideline document underwent review and was re-issued with the aim of establishing a process-based system which:

  • Emphasises the responsibilities of Process Owners.
  • Promotes greater integration of the main compliance principles into the processes.
  • Safeguards the operational autonomy of Saipem companies.
  • Redefines Corporate’s role of steering, coordination and control.

With regard to the System of Internal Powers, the process for conferring powers and proxies was examined and improved, while the relevant procedure was reviewed and re-issued. Finally, the Authorisation Matrix used for Saipem SpA and its branches – a tool for the governance of the main Company processes/activities and/or those considered most sensitive – was updated and re-issued, while the matrices used in subsidiaries and their branches were re-aligned, with standard powers and economic limits set for the various organisational positions commensurate with the dimensions and complexity of the entities in question.

2013 was a difficult year for Saipem, one which required activity on many fronts to restore the efficiency and competitiveness of the business. Our priority was to take actions to tackle structural problems and to stabilise Engineering & Construction activities by addressing a fundamental series of legacy issues. The Drilling business continued to provide consistently strong returns. 2014 will be a transition year in which a significant proportion of Engineering & Construction activities will stem from low-margin legacy contracts.

Umberto Vergine, Saipem Chief Executive Officer