SCH2017_DRF_EN_Livre.indb

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Overview of the Group’s strategy, markets and businesses Internal control and risk management

8. Internal control and risk management

8.1 Definition and objectives of internal control and risk management Definition and objectives The Group’s internal control procedures are designed to ensure: E compliance with laws and regulations; E application of instructions and guidelines issued by Group Senior Management;

Internal control reference documents The Group’s internal control system complies with the legal obligations applicable to companies listed on the Paris stock exchange. It is consistent with the reference framework laid down by the Autorité des Marchés Financiers (French Financial Markets Authority – AMF) on internal control and risk management. The Group’s internal control process is a work in progress; procedures are adapted to reflect changes in the AMF recommendations and the business and regulatory environment, as well as in the Group’s organization and operations. Information used to prepare this report This report was prepared using contributions from the Group’s Internal Audit and Internal Control Departments, the Management Control and Accounting Departments, as well as the various participants in internal control. It was reviewed by the Audit Committee.

E the proper functioning of the company’s internal processes; E the reliability of financial reporting; and more generally, internal control helps the Group manage its businesses, run efficient operations and use its resources efficiently. Internal control aims to prevent and manage risks related to the Group’s business. These include accounting and financial risks, as well as operating, fraud and compliance risks. However, no system of internal control is capable of providing absolute assurance that these risks will be managed completely. Scope of this report The system is designed to cover the Group, defined as the Schneider Electric SE parent company and the subsidiaries over which it exercises exclusive control. Jointly controlled subsidiaries are subject to all of the controls described below, with the exception of self-assessments of the implementation of Key Internal Controls (see “Operating Units” below), page 61. In 2017, the Group’s organizational chart is based on Senior Management for Global Functions and Operating Divisions; defined in terms of businesses, geographical location, logistical or industrial responsibility. The Group’s corporate governance bodies supervise the development of the internal control and risk management systems. The Audit Committee has particular responsibility for monitoring the system’s effectiveness (see committees of the board, chapter 3 section 4, page 173). Each manager is responsible for monitoring internal control in his or her area, at the different levels of the organization, as are all Key internal control participants, in accordance with the tasks described below. Senior Management Senior Management is responsible for designing and leading the overall internal control system, with support from all key participants, in particular the Group Internal Audit and Internal Control Departments. It also monitors the Group’s performance, during business reviews with the Operating Divisions and Global Functions. These reviews

8.2 Organization and management: internal control key participants

cover business trends, action plans, current results and forecasts for the quarters ahead. Similar reviews are carried out at different levels of the Group prior to Senior Management’s review. Internal Audit Department The Internal Audit Department reports to Senior Management. It had an average headcount of 20 people in 2017. The internal auditors are responsible for ensuring that, at the level of each unit: E the identification and control of risks is performed; E significant financial, management and operating information is accurate and reliable; E compliance with laws and regulations and with the Group’s policies, standards, procedures is ensured; E compliance with the instructions of the Head of the Group is ensured; E acquisition of resources is carried out at a competitive cost, and their protection is ensured; E expenses are properly engaged and monitored; E correct integration and control of acquisitions is ensured.

2017 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC

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