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SWiFT 3000

The new standard for Corporate Governance evaluation

IMCA

7 September 2011

David W Duffy – Prospectus

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Agenda

2 What are the benefits?

1 What Is SWiFT 3000?

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Why should an organisation apply for the SWiFT designation?

How to get ready for SWiFT?

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What is SWIFT 3000?1

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What is SWiFT 3000?

• Produced by a corporate governance working group convened by the NSAI and supported by IoD, CGAI and IPA.

• Provides a best practice Irish specification for the conduct of an external evaluation

• Facilitates the external assessment of Corporate Governance performance by providing a standard framework of assessment of compliance with relevant codes

• The assessment is confidential and voluntary

• The objective is to assess the corporate governance frameworks of companies and specifically the level of compliance by companies with governance codes of best practice relevant to them:– OECD Principles– Combined Code on Corporate Governance– Code of Practice for the Governance of State Bodies

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Following codes are in development

• ISE (UK code of Corporate Governance) for Irish Plc.'s

• Corporate Governance Code for Credit Institutions and Insurance Undertakings

• Corporate Governance Guidance and Principles for Unlisted Companies in Europe ecoDa

• Codes In Development for; Family, SMB, Voluntary, Funds

• Relevant sectoral Codes as approved for inclusion as they emerge

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SWiFT 3000 – Scope and Process

• Scope of the assessment will examine the following: – Board Composition– Board Processes– Execution of Board Role

• Companies which meet the specifications of the Code will be awarded the SWiFT 3000 Certification by independent accredited certification bodies.– Certification Europe– NSAI ey

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Assessment Methodology: Process Overview

Phase 1 Planning & Preparation

Phase 2 Initial Review

Phase 3Interview & Follow-Up

Phase 4Reporting & Follow-Up

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The Main Bodies Involved in SWiFT3000 (Auditors)

Association of Accredited

Certification Bodies

Certification Body (CB)

Audit Team - Technical + Process Auditor

CB CBCB CB CB

Client seeking certification to

SWiFT 3000

Oversight Committee

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The Main Bodies Involved in SWiFT3000 (Auditors)

• In SWiFT 3000 there are two types of auditor

– ‘Technical Auditor’:• Any assessor on the list of ‘Appointed Assessors’ as maintained by the Oversight

Committee. At present determined by successful completion of exam on approved affirmation courses.

– ‘Process Auditor’• A practicing & experienced management system auditor working with the CB, &

approved under the ISO 17021 competence assessment. Furthermore will have attended a designated corporate governance affirmation course.

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SWiFT 3000 – Scope and Process

People interested in becoming accredited corporate governance assessors arerequired to:

– Meet the criteria specified in Annex C – “Assessor qualifications and other conditions” as per NSAI SWiFT 3000 available on www.nsai.ie; AND

– Undertake and successfully complete a three day programme on corporate governance being run by Prospectus - www.prospectus.ie

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What are the benefits?2

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Benefits of SWiFT

Provides external, independent, validation of good business standards and a healthy Governance environment

Is an affirmation of a proper functioning business and Board

Certifies the right “tone from the top”

Benchmarks the Board against its peers

Will help in attracting higher calibre board members

Plays a part in restoring business trust and confidence in Ireland

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Why should an organisation apply for SWiFT?

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The SWiFT standard will set organisations apart for their high standards of corporate governance

Reassures stakeholders, staff, customers, suppliers and investors

Recognises a Board’s commitment to real Governance

Enhances reputation, profile, business

Sees past rhetoric and hollow written claims

Facilitates real openness and transparency

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How to get ready for SWiFT?4

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Getting ready for SWIFT

Diagnostic Key gaps Improvement plan

SWIFTReady

>>>>> following shows the elements of the SWIFT process

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Scope of the Assessment

The Corporate Governance Assessment involves examination of three core areas:

• Board composition• Board processes• How the Board executes its role

These 3 areas encapsulate the main principles of the relevant codes of Corporate Governance best practice.

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The Assessment Methodology

The assessment methodology is crucially evidence based and principally relies on the following:

• Board documents & records relevant to the scope of the Assessment

• Questionnaires

• Interviews

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  Core competency Assessment Assessment     rating average

Main principles   (0 to 4)    A. The Company    1 A1 The Board 4  2 A2 The Chairman and CEO 4  3 A3 Board balance and independence 4  4 A4 Appointments to the Board 2  

5 A5 Information and Professional Development 2  

6 A6 Performance Evaluation 2  7 A 7 Re-election 2    B. Remuneration    8 B.1 Level and Make-up of Remuneration 3  9 B.2 Remuneration Procedure 3    C. Accountability and Audit    

10 C.1 Financial Reporting 4  11 C.2 Internal Control 4  

12 C.3 Audit Committee and Auditors 4  Rating   3.17  

Key headings for the evaluation

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A sample of Board Documents that could be reviewed

Board procedures, board documents, records Board terms of reference List of matters reserved for board's decision Schedule of board and committee meetings for the prior and current year An appropriate sample of board meeting agenda and supporting

documentation Board Minutes Internal audit work plan Audit committee papers Committee terms of reference latest set of annual report and accounts Strategic plan

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A sample of pre-assessment Questionnaire (to Board members)

The Board • By what means does the board direct and control the company? • Does the board have processes in place for succession planning? • Has the board ensured that systems of risk Management and other systems of internal

control are established and operate in practice?

Board balance regarding appointments and independence • Are the range of skills, knowledge and experience on the board appropriate?

Information flows • Is the form and quality of the information supplied to the board appropriate to enable it to

discharge its duties? • How does the company secretary ensure good information flows between senior

Management and non-executive directors?

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A sample pre-assessment Questionnaire(to the Company Secretary or Designated Representative)

Board • What committees are established and who are the members? • Are the mandates for the board and committees clear and effectively defined?• Are there independent directors and do they meet the independence criteria in the

CombinedCode?

• Has the board appointed an independent non-executive director to be the senior independentdirector?

• Do all directors receive induction on joining the board?

Board evaluation • Does the board undertake a formal and rigorous annual evaluation of its own

performance? • Does a similar evaluation of the performance of committees take place? • Is the performance of individual directors also evaluated?

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A sample pre-assessment Questionnaire(to the Company Secretary or Designated Representative)

Remuneration • Is there a board remuneration committee operating in accordance with the

provisions of the Combined Code? • Are there procedures in place to avoid conflicts of interest in setting levels of

remuneration?

Accountability and Audit • Has the board adopted policies governing corporate conduct, including

compliance with applicable laws and regulations? • Does at least one member of the audit committee have recent and relevant

financial experience?

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Detailed review of Board Composition

• Responsibilities of the board • Composition and structure of the board • Balance and Diversity • Skills expertise and experience • Chairman/CEO separation • Election of directors • Time commitment • Board Independence • Composition of board committees• Role of the chair

•Lead independent director•Company secretary • Knowledge of company • Appointment of directors• Information on board nominees • Board induction, and development• Related Party Transactions • Director Declarations• Conflicts of Interest

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Board processes

Processes relate to the underlying mechanisms used by the board.

The following are assessed:

Collective responsibility of the board, Terms of reference (Board and Committee(s), Matters/decisions reserved for the board/Management, Board meeting process, Committee meetings, Decision making process, Information flows (between Management and the board and between the board and

stakeholders).

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Finally, some thought's and observations….

• Moving beyond ticks in boxes, “hassle” to embedded CG environments

• Reputational risk damage, is a strong driver and desire to avoid the mistakes of the past

• Genuine desire to improve business culture is more evident

• This is unique in Europe!

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Title: Head of HR Practice, Prospectus

Email: pangulo@prospectus.iePhone: +353 1 218 0319Fax: +353 1 260 3130

Pedro is responsible for the ongoing development of the Prospectus HR Consultancy Practice, including business development and

the delivery of innovative HRM and organisational development initiatives and projects

He has over 10 years HR consulting and executive development experience. Prior to joining Prospectus Mr. Angulo has worked in senior management roles in Penna, Deloitte, IBM Business Consulting Services and PricewaterhouseCoopers in Dublin

Pedro has led the design and implementation of large-scale human resources with both national and international clients, in the public and private sectors. Some of his clients include: DIT, Integration Centre, British American Tobacco, Holcim, UCD, ESB, National Concert Hall, Combat Poverty Ireland, Bord Gais Eireann, INTO, Port of Cork, European Rugby Cup, St. James’s Hospital, National University of Ireland, DSFA, Musgrave, ICON, O2, Permanent TSB, Teagasc, Enterprise Ireland, Glanbia, Tesco, AIB, Revenue Commissioners, Diageo, and Kimberly Clarke

For a number of years, Pedro has been a part-time senior lecturer and examiner in the Michael Smurfit Graduate Business School

Pedro holds an MBS in Management from UCD, is a member of the IMCA, and a Board member of the EMCC

Title: Director, Prospectus Email: dduffy@prospectus.ie Phone: +353 1 218 0304 Fax: +353 1 260 3130

David is the founder and a director of Prospectus. He graduated from Trinity College Dublin with a Bachelor of Business Studies Degree and is a Chartered Accountant. He also holds an MBA from IMD in Lausanne, Switzerland

SWiFT Programme Leaders

He has extensive experience in planning and implementing significant strategic, management and organisational change, and advising on corporate governance in the public, private and not for profit sectors

He is a member of the Institute of Directors and was President of the Institute of Management Consultants in 1992 and 2007

He is also the author of a book published by Prospectus in May 2004, titled “The Management of Management – A practical guide to Corporate Governance”. Prospectus is bringing out a new book on corporate governance in the 2011 to build on the success of the last publication

David has led the governance reviews of a number of organisations including: Institute of Taxation in Ireland, HEA, Royal Hospital Donnybrook, National University of Ireland at Maynooth; St Vincent’s Healthcare Group; EBS, Health Research Board; Revenue Commissioners. Radiological Protection Institute of Ireland; Public Appointments Commission

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DAY 1

DAY 2

DAY 3

9.00-10.00 Programme Introduction

Welcome and Introductions Programme Context, Aim and Objectives Agenda and Assessment

10.00-11.30 Introduction to Corporate Governance 11.45- 13.00 SWIFT 3,000

Scope, Assessment Requirements and Methodology 13.00-14.00 Lunch 14.00-17.00 Codes of Best Practices

The Combined Code on Corporate Governance Code of Practice for the Governance of State Bodies OECD Principles of Corporate Governance

17.00-17.30 Review and Close

9.00-9.30 Recap from Day 1 9.30-12.30 Technical and Process Assessors

Relationship between the bodies involved Certification Body standards & accreditation The relationship between the technical and the

process assessor – Team mechanics

12.30-13.00 Introduction to the Case Study 13.00-14.00 Lunch 14.00-15.30 Case Study - Part 1: Planning & Preparation for the Assessment 15.45-17.00 Case Study - Part 2: Initial Review of Board documentation 17.00-17.30 Review and Close

8.45-9.00 Recap from Day 2 9.00-13.00 Case Study - Part 3: Interviews & Follow Up 13.00-14.00 Lunch 14.00-16.30 Case Study - Part 4: Reporting & Follow Up 16.30-17.0 Exam Discussion 17.00-17.30 Close & Participant Feedback

Getting Ready for SWIFT- The Three Day Training Programme

Objectives and Agenda• At the end of this programme participants will have:

– A clear understanding of SWIFT 3000– Improved their knowledge of the Codes– Further develop their corporate governance assessment skills