Internal control and risk management systems connected with the financial reporting process
YIT Corporation’s business operations are organised into three reporting segments: "Housing Finland and CEE", "Housing Russia" and "Business Premises and Infrastructure". Each segment has a significant number of regional divisions and business units that are accountable for business results.
YIT Group’s Management Board is the highest operational decision-making body and responsible for allocating resources to the business segments. The Management Board is also responsible for assessing the performance of the business segments.
YIT Corporation’s financial reporting and supervision are based on budgets drafted and ratified every six months and on monthly performance reporting. The Group’s financial reporting is based on financial data on the profitability by each cost centre combined with segment- and Group-level data. YIT Corporation’s business is characterised by project-type operations, due to which financial reporting applies the percentage of completion method (POC) in accordance with the degree of completion and sales, for example. Accurate information on the degree of completion and sale of the project and the final cost estimate are essential for the reliability of financial data in project business.
The aim of the internal control and risk management systems related to the financial reporting process is to ensure the harmonised and reliable reporting of the Group’s financial results in a manner compliant with applicable laws and regulations and the reporting principles confirmed in YIT Group. The responsibilities of risk management and internal control are defined in the Group’s risk management policy as well as in the standing orders of the Group and its business segments. The standing orders describe the key tasks, operations and responsibilities of the different administrative bodies. The Group’s business reporting process has been decentralised to the segments that are responsible for business results, thus making internal control also a part of the segments’ operations.
Group accounting, which works under the supervision of the Group’s CFO, defines and communicates the principles related to financial reporting, maintains the tools required for accounting and reporting and prepares the official financial statements published by the Group. The financial management of the business segments are responsible for ensuring that reporting within segments is carried out according to instructions. The Group’s financing, IT administration, investor relations and insurance matters as well as the preparation of its most significant corporate acquisitions are centralised.
Identification and assessment of risks related to financial reporting
The Group’s financial and financing management is responsible for identifying and assessing risks in relation to financial reporting. The processes and systems of financial reporting are developed continuously. A risk assesment is carried out annually. These assessment is used as a basis for the further development of supervision and control measures and the control points of reporting, to prevent the materialisation of risks.
Management of risks related to financial reporting
Risks related to financial reporting are managed with the help of the Group’s accounting manual, financing policy, investment guideline, acquisition instructions and internal audit.
The Group CFO and the Investor Relations (IR) function are responsible for the publication and release of financial information and for the fulfilment of disclosure oblications concerning a listed company. IR is also responsible for the planning and implementation of investor communications and for daily contact with investors and analysts.
The aim of the company's Investor Relations is to support the appropriate valuation of the YIT share by providing all market parties with all essential information concerning YIT in a contiuous and consistent manner.
Corporate Communications maintain YIT's communication policy, published on the Group's website, as well as the internal guidelines for external and financial communication. The instructions pertaining to financial reporting are available to the personnel on YIT's intranet.
YIT’s business segments are responsible for the accuracy of the segment data presented in interim reports and financial statements. The Group’s accounting department is responsible for the accuracy and scope of the Group-level numerical data as well as their compliance with rules and regulations. The Audit Committee reviews information that is to be published and submits them for the Board of Directors’ approval.
The Group’s financial management board convenes on a monthly basis. It is composed of the segments’ chief financial officers as well as representatives from Group accounting, Group financing and IT administration. The Group’s Corporate General Counsel, Group Tax Manager and the head of internal audit can also participate in meetings of the financial management board. The financial management board addresses all process and development issues concerning the business segments.
YIT Group’s internal audit organisation supports the management in the development and supervision of risk management, internal control and good corporate governance. The internal audit reports to the Audit Committee of the Board of Directors and administratively to YIT’s President and CEO. The targets of the internal audit are selected based on risk. The focus of the internal audit has typically been on project risk management, new geographic operating regions and semi-annually defined risk areas.
The internal audit’s work is co-ordinated with other Group functions and, where possible, with financial auditing. The internal audit also works closely together with the Group’s corporate security organisation and, with respect to misconduct risks, participates in the work of the Ethics Committee.