Internal Control

General

According to the Swedish Companies Act, the Board is respon sible for internal control. The aim of internal control is to create a clear structure of responsibility and an effective decision-making process. The Board has defined a number of basic documents of importance for financial reporting in order to guarantee an effective control environment. The Board’s rules of procedure and the instructions for the CEO serve to guarantee a clear allocation of roles and responsibilities, with the aim of operational risks being managed effectively. The Board has also drawn up a number of basic guidelines and policies that are important for internal control, such as a financial policy, instructions for accounting and reporting, employee handbook and a communications policy. The basic control documents are subject to review on an ongoing basis. An effective control environment also requires an adequate organizational structure and ongoing reviews of this. Company management reports to the Board on a regular basis following defined routines. Company management is responsible for the system of internal controls that is required to deal with significant risks in operating activities. Managers at various levels within the Group have clearly defined authority and responsibilities with regard to internal control.

Operating segments

The Group divides its operations into three operating segments: Corporate Promo, Sports & Leisure, and Gifts & Home Furnishings. Within Group management there are people with responsibility for each operational segment in order to coordinate operations. The products follow the operational segments, but have separate sales teams for the different sales channels, promo and retail.

Sales channels

The Group’s products are sold via two sales channels, promo and retail.

Concept groups

Within each operational segment there are a number of concept groups responsible for strategic direction, product development and marketing strategy for one or more brands.

Financial risk assessment

The material risks New Wave Group have identified in connection with the financial reporting are inaccuracies in the reporting and valuation of stock, intangible assets, accounts receivable, inte rest-bearing liabilities, tax, currencies and the risk of fraud, loss or embezzlement of assets. The greatest financial risks in terms of value in the balance sheet are:

  • Stock, which accounts for around 44% of the value of the Group’s assets
  • Intangible assets (mainly goodwill & trademarks), which account for 23% of the value of the Group’s assets
  • Accounts receivable, which account for around 17% of the value of the Group’s assets
  • Interest-bearing liabilities, which account for around 31% of the Group’s balance sheet total

Control environment

The foundations of the internal control in relation to the financial reporting consist of the general control environment with organization, decision-making paths, authority and responsibilities that have been documented and communicated. Within New Wave Group some of the most important constituent parts of the control environment are documented in the form of policies, e.g. IT policy, financial policy, environmental policy and instructions, such as authorization instructions and a reporting manual.

Control activities

In order to ensure the internal control works, there are both automatic controls in IT based systems, which handle authority and authorization rights, and also manual controls in the form of e.g. reconciliations and physical counts. Detailed economic analyses of the result plus follow-up of plans and forecasts supplement the controls and provide a general confirmation of the quality of the reporting.

The Group performs reviews of the companies’ routines and accounting methods, which are reported to Group management. No CEO is permitted to appoint or dismiss a finance manager, and finance managers’ report directly to the Group’s CFO. The Group’s risks with regard to financial reporting lay in the risk that material misstatements may occur when reporting the company’s status and financial results. The company’s accounting instructions and manuals, together with established follow up routines, serve to minimize these risks.

Information & Communication

he most important control documents in the form of policies and instructions are updated regularly and communicated via relevant channels electronically and/or in printed form. For communication with external parties, there is an information policy which specifies guidelines for how this communication should take place. The purpose of the policy is to ensure that all information obligations are fulfilled correctly and in full.

Follow-Up

Finance personnel and management at company and Group level analyze the financial reporting in detail every month. The Group’s central support staff is responsible for implementing, further developing and maintaining the Group’s control routines, and for performing internal controls of business critical matters. New Wave Group’s privatized structure involves a controllerbased organization, which is responsible for ensuring that financial reporting from each unit is correct, complete and on time. The controls in respect of the various processes and risk elements are evaluated by means of self-assessment, internal Board meetings and via the company’s external auditors. Most processes are fully or partly centralized at Group level, such as purchasing, logistics, payments, financing, IT, the consolidation and compilation of Group reports. The Board receives financial reports on an ongoing basis, and at each Board meeting they discuss the financial situation facing the Group and the various companies. During the year the Board has also received reports from the company’s auditors detailing their observations.

The companies

New Wave Group’s organization is decentralized, with a high degree of independence and self-determination being delegated to company management. The objective is for the companies to be run in an entrepreneurial spirit, while at the same time enjoying the benefits of belonging to a large group of companies. The Group therefore consists of a large number of operational companies, approximately 50 in total, some of which belong to sub-groups. Board meetings are held about three times a year in each company or sub-group. The composition of the Boards depends on the company’s direction and its stage of development. In addition to Group management, the expertise of CEO s in “mature” companies is utilized on the Boards of local subsidiaries. The organizational model chosen by New Wave Group provides for effective benchmarking of profitability, tied-up capital and growth between companies, brands and markets.