BAE Systems 77 Annual Report 2017 18 Group strategic framework How we work Organisation The Operational Framework sets out the principles of From the Board downwards, we set out how we are good governance which, together with our culture, guide organised and the responsibilities of the Board, the our work and behaviour in support of the strategy set in Chairman, the Chief Executive, the Executive Committee, our Group strategic framework (see page 18). Here we our Functional Councils (such as Engineering, Human set out the values that we ask all our employees to Resources and Procurement) and the senior executives demonstrate in their day-to-day work, wherever they charged with running our businesses. are in the world. Governance The UK Corporate Governance Code’s (the Code) principles are embedded in the Operational Framework, and its policies and processes underpin all the disclosures made by the Board pursuant to the Code’s provisions. How we conduct our business is fundamental to the success of BAE Systems. The Operational Framework sets out our approach and the standards to which we adhere. It includes the following: Code of Conduct Responsible Internal controls Risk framework Workplace and Delegated Lays out the Trading Principles Provide assurance This is how we operational authorities standards that are We do not regarding: identify, analyse, environment As part of a robust expected of each compromise on the – the reliability evaluate and This covers how we system of internal of us, to support way we do business and integrity of mitigate risk expect our people controls, the Board us in doing the right and here we mandate information; (see page 66). to be managed and has delegated thing. All employees a principles-based – compliance with the obligations certain authorities receive annual approach to our policies, processes, placed on us all to executive training designed business activity. laws, regulations concerning avoiding management. to stimulate and contracts; conflicts of interest, Delegation is subject conversations anti-bribery, and to financial limits about ethical – the safeguarding managing the and other decision-making. of assets and security of our restrictions, above protection against people, information which matters fraud; and and other assets. must be referred – the economical to the Board. and efficient use of resources. Operational Assurance Statement (OAS) This key governance process requires that a return is completed every six months by each operational and functional business head, reporting their formal view against such matters as compliance with law and regulation, ethical business conduct, financial controls, risk management, compliance with business planning processes, health and safety, conflicts of interest, delegated authorities, appointment of advisers and product safety. There is a separate OAS process for our joint ventures. Our Internal Audit function owns the OAS process. It is managed independently from management functions. The Internal Audit Director reports functionally to the Audit Committee and, for day-to-day operations, to the Chief Executive. Core business processes These core business processes are mandated by the Operational Framework and designed to ensure consistent planning, reporting and review of business performance across all businesses: IBP LCM M&A TPL (Integrated Business Planning) (Lifecycle Management Policy) (Mergers & Acquisitions Policy) (Total Performance Leadership) Approved by the Board annually, How we plan and manage the A structured approach to A set of people-related creates a consistent approach execution of all projects above a mergers, acquisitions and activities that help to identify, to strategic planning, aligning certain minimum level, providing disposals. select, manage and reward resources with the delivery of decision gate reviews at key leaders, and facilitates forecast financial performance stages from initial opportunity succession planning. and strategic objectives. to final closure.