3. Risk factors and control environment
3.2. Components of the Internal Control and Risk Management system
This diagram shows the components of the internal control and risk management
PERMANENT CONTROL
Level 1
Conducted by each employee and their line managers in the day-to-day implementation of their activities.
- Operational management
- Employees
Level 2
Conducted by the Support Divisions in their fields of expertise.
Define cross-functional policies/standards. Support the divisions in implementing them.
- Risk management & Internal control departments
- Functional departments
- Internal control managers at Entity level
- Operational support functions
PERIODIC CONTROL
Level 3
Conducted by Audit (internal or external)
It assesses how well the system is working and contributes to its improvement.
- Board of directors/Audit committee
- General management
- Internal & External Audit
3.2.COMPONENTS OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM
3.2.1. Organisation and environment
The control environment, which is critical to the Internal Control system, good risk management and the application of procedures, is based on behaviour, the organisational structure and employees. At L’Oréal, it forms part of a culture of rigour and commitment communicated by senior management and is also in line with the Group’s strategic choices.
The Group’s Ethical Principles
Ethical Principles
L’Oréal has built up its business on the basis of strong ethical principles that guide its development and contribute to establishing its reputation: Integrity, Respect, Courage and Transparency. The Group’s policies on sustainable development, social and societal responsibility, compliance and philanthropy are based on the Ethical Principles.
L’Oréal’s Code of Ethics is available in 45 languages and in Braille in English and French. It is distributed to all employees around the world. It enables employees to understand how these Ethical Principles need to be reflected in their behaviour and actions by providing simple rules and a description of concrete situations they may encounter. The Code of Ethics applies to all employees, directors and corporate officers and members of the Executive and Management Committees of the Group and its subsidiaries worldwide. Since 2010, 16 supplements to the Code of Ethics have covered certain aspects of the Code in more detail.
The Chief Ethics, Risk and Compliance Officer
The Chief Ethics, Risk and Compliance Officer reports directly to the Chief Executive Officer and keeps him informed on a regular basis.
His mission on Ethics is to:
- ensure the promotion and integration of best practices within the Group, providing guidance in ethical decision-making;
- oversee employee training;
- oversee the management of complaints and directly manage those related to senior management positions;and
- measure and assess the Company’s ethical performance.
The Chief Ethics, Risk and Compliance Officer regularly informs the Board of Directors and the Executive Committee.
He has a dedicated budget and team, unrestricted and on first demand access to all information and documents concerning the Group’s business activities and can call upon all the Group’s teams and resources to carry out his/her mission.
Implementation of L’Oréal’s Ethics and Human Rights approach
Country Managers (or for Corporate or Zone staff, the members of the Group’s Executive Committee to whom they report) are responsible for ensuring compliance with the Code of Ethics. The Chief Ethics, Risk and Compliance Officer systematically meets each new Country Manager and the Group’s senior managers to provide guidance about their role. Senior managers also benefit from a tool to help develop their ethics leadership as well as specific training.
The role of the 77 Ethics Correspondents throughout the world is to assist members of the Executive Committee and Country Managers in implementing the Ethics programme and to provide all employees with a local point of contact, whilst promoting the normal routes for handling concerns by management and Human Resources. The Ethics Correspondents benefit every year from a specific support and training programme.