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Corporate Governance

LAUGFS Holdings Limited ensures the adoption of the highest standards of Corporate Governance requirements recommended by the Code of Best Practices on Corporate Governance compiled by the Securities and Exchange Commission of Sri Lanka in collaboration with the Institute of Chartered Accountants of Sri Lanka and the principles of corporate governance set out in the Code on Corporate Governance in the United Kingdom.
The Board of Directors is fully responsible to its shareholders and statutory bodies and all other stakeholders of the Company to ensure that the Company is growing sustainably while creating a strong Corporate Governance environment and a framework in order to ensure investor protection and confidence.

Corporate Governance Structure

The Company's Corporate Governance framework is structured clearly specifying the key elements of external and internal structures while adopting the said Corporate Governance framework into the management systems to ensure investor protection and deliver the maximum productive outcome to the shareholders value while ensuring the sustainable development of the Company.

Board of Directors Companies ActNo. 07 of 2007 Code of Best Practice onCorporate Governance 2013 Rules, regulations, determinations,directives and circulars issuedby the Consumer Affairs Authority Inland RevenueAct No. 10 of 2006 Other Statutes External Audit Risk & Control Articles of Association Code of Ethics INTERNAL EXTERNAL Business & Operations Finance Environment Reputation 1. Production & Process2. Safety3. Market4. Human Resources5. Information Technology 6. Foreign Exchange Risk and Interest Rate Risk7. Liquidity Risk8. Credit Risk 9. Economical, Political, Legal, Social 11. Quality Board of Directors Managing Director Head SustainabilityCommitteeCEO, LAUGFS Gas CEOLAUGFS Eco Sri General ManagerLAUGFS Leisure Chief FinancialOfficer Group GeneralManager - HRD Head of CorporateCommunications AGM BusinessCoordination

Board of Directors

The Board of Directors is responsible to the Shareholders for creating and delivering long term sustainable shareholder value while practicing and maintaining business affairs and other activities of the Company with the highest corporate ethical standards through the regulatory and legal framework in the best interest of all the stakeholders of the Company.

The Board of Directors provides entrepreneurial leadership and strategic direction to the management to develop short, medium and long term corporate business strategies and reviewing and providing of necessary guidance on budget planning, reviewing of the system of human resource management, corporate governance, statutory compliance, assisting of internal audit and integrated risk management and approving and reviewing of major and substantial investment, which ensure the sustainable development of the Company, thereby ensuring investor protection and the best interest of other stakeholders. Such business strategies are subject to review by the Board from time to time as appropriate.

The Board of Directors provides entrepreneurial leadership and strategic direction to the management to develop short, medium and long term corporate business strategies and reviewing and providing of necessary guidance on budget planning, reviewing of the system of human resource management, corporate governance, statutory compliance, assisting of internal audit and integrated risk management and approving and reviewing of major and substantial investment, which ensure the sustainable development of the Company, thereby ensuring investor protection and the best interest of other stakeholders. Such business strategies are subject to review by the Board from time to time as appropriate.

LAUGFS Holdings Limited has concentrated on the necessity of having and maintaining a mix of skills and professional experience as appropriate in the Board of Directors. The Board of Directors recognises and acknowledges its responsibility for the Company's system of internal control and for reviewing its effectiveness on a continuous basis with the recommendations made by the in-house Group Risk and Control Division. These said, internal control systems manage the risk of the Company's business activities and other affairs and ensure that the financial information on which business decisions are made and published are reliable. Further the Board ensures that they are fully satisfied with the integrity and accuracy of published financial information and the effectiveness of the financial controls and systems of risk management of the Company.

Members of the Board collectively and individually recognise their duty to comply with the legal and regulatory provisions applicable to the Company and the Board ensures that procedures and processes are in place to ensure that the Company and its subsidiaries comply with all applicable legal and regulatory provisions.

Directors are responsible to the Board for bringing independent and objective judgements, scrutinising the proposals and recommendations made by the corporate management on the issues of corporate and business strategy, performance, utilisation of resources and business conduct. The Board of Directors promotes an environment whereby challenging contributions and Directors are encouraged, welcomed and combined with their independent analysis and opinion based on professional knowledge and experience.

Every member of the Board has the access to advice and services of the Company Secretary for matters relating to Board procedures and any clarification on applicable rules and regulations. The Board was provided with all the necessary and timely information by way of Board Papers, Information Papers and Reports in order to exercise decision making responsibilities in a more efficient and effective manner.

Conflict of Interest

Members of the Board are obliged and responsible to disclose and determine whether they have any potential or actual conflict of interest arising from external association, interests in material business matters and personal relationships and obligations, which might make undue influence on the independency and decisions of the members of the Board.

The Board of Directors makes maximum effort to review such conflict of interests, which may arise from time to time.

System of internal control

The Board of Directors, through the involvement of the Group Risk and Control Department, has taken all necessary measures and steps to assure that the systems designed to safeguard the Company's assets, maintain proper and accurate accounting records as per prevailing accounting standards and provide management information, are in place and are functioning transparently in accordance with the required standards. The risk review programmes covering the internal audit function of the Company and its subsidiaries are monitored by the internal audit team of the Company subject to the direct supervision of the Chairman and the Managing Director.

The Company has introduced a Code of Conduct and Ethics requiring all employees to exercise honesty, objectivity and due diligence in performing their duties, maintain confidentiality of commercial and price sensitive information, work within applicable laws and regulation, safeguard company's assets and avoid conduct which will badly reflect on them or company's image. The said Code of Conduct and Ethics addresses issues relating to conflict of interest situations, bribery and corruption, entertainment and gifts, accurate accounting and record keeping, corporate opportunities, confidentiality, fair dealing, protection and proper use of company assets, compliance with laws and regulations, and encourages the reporting of any illegal or unethical behavior.

The Board of Directors obtains independent professional advice where necessary on legal and regulatory issues, macro-economic forecasts and other relevant matters.

RISK MANAGEMENT

INTRODUCTION

Risk management has become vital in LAUGFS Group with its expansion into diversified business sectors. The process of Risk Management is developed to ensure that key risks are proactively identified and managed effectively with a view to protect shareholder value and thereby reducing and eliminating risks, in fulfilling LAUGFS's vision to be the most preferred and trusted Sri Lankan multinational.
The Group follows Enterprise Risk Management (ERM) which mainly includes conducting risk analysis, implementing strategies to eliminate or reduce the risks and developing a system to provide an early warning of potential risks to the Company.
The purpose of the risk management practices of the Group is to protect the business from being vulnerable to environment, market and internal irregularities. The focus is on keeping the Group of Companies viable by reducing these risks. Risk management is also designed to protect our employees, customers and the general public from negative events such as fire or accidents and to preserve the physical facilities, data, records and physical assets we own or use. This process helps the Group by providing a framework that enables future activity to take place in a consistent and controlled manner and also improves decision making, planning and prioritisation by comprehensive and structured understanding of business activity, volatility, project opportunity and threat.

Risk Management Process & Strategies for Managing Risks

The purpose of risk management is to identify internal and external risks, which will impact the Group of companies and to come up with mitigation plans to face them. The Group Risk and Control division is constantly in search of internal and external threats which would impact on the companies.

The strategies the Company adopts to manage the risk depend on the type of risk and the severity of the risk, which are outlined as follows,


  • Accepting the consequences of the risk and budgeting for it.
  • Avoiding the possibility of the risk occurring.
  • Transferring the risk to another party.

The process of risk management in LAUGFS Group can be depicted as follows

risk

The Group Risk and Control division undertakes a comprehensive risk assessment of all structural, operational, financial and environmental risks by using a Risk Register uniquely prepared for LAUGFS Group, assessing the impact and mitigation plans. These identified risks have been reported to the management of the Group companies and have analysed the impact and the actions to mitigate those risks. Risk treatment and monitoring is a continuous process, which is vital for sustainable risk management by the Group Risk and Control Division. The core risks relevant to each Company, which have a long-term impact to the Group are identified by the management during the risk review process. Further, the Risk Register of each company along with the mitigation plan are presented for review to the top management and to the Audit Committee.

The Risk Register comprises of risks in the following categories


Business & Operations
  • 1. Production & Process
  • 2. Safety
  • 3. Market
  • 4. Human Resources
  • 5. Information Technology
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Finance
  • 6. Foreign Exchange Risk and Interest Rate Risk
  • 7. Liquidity Risk
  • 8. Credit Risk
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Environment
  • 9. Economical, Political, Legal, Social
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Reputation
  • 11. Quality