Risk Management

Sound risk management is the very essence of a successful business and our procedures are clearly defined and enforced.

Measures to ensure responsible business conduct and the identification and assessment of risks associated with social, ethical and environmental matters are managed in conjunction with all other business risks and reviewed at regular meetings of the board, the Audit Committee and the Chief Executive’s Committee (CEC).

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The board has embedded environmental, social and governance matters into its risk management processes and formally reviews the area once a year. The board is ultimately responsible for social, environmental and ethical matters. It met eight times during the year. Specific responsibilities are delegated to board committees and the minutes of the sub-committee meetings are presented at each board meeting.

The Chief Executive’s Committee (CEC) is the sub-committee of the board responsible for the day-to-day management of the company. It meets monthly (except in August) and is chaired by the Chief Executive. During 2008/09 it comprised the executive directors and five senior executives of the company.

The CEC has approved policies on Environment, Health and Safety (EHS), Business Integrity and Ethics and Employment. These policies set out key objectives for assessment and control of risks and have been distributed to site management. The policies form the cornerstone of our commitment to continuous improvement in all aspects of social, ethical and environmental matters at all our operations around the world. They reflect our values and enable us to integrate our principles into practice in our business processes.

The CEC receives reports and minutes of the meetings of its sub-committees which address specific risk and control areas and review the effectiveness of risk management processes. Members of the CEC are free to raise points on the minutes presented. Risk and control issues are also addressed during the discussions on business performance in every CEC meeting. During the course of the meetings, key EHS, social and governance issues are reviewed.

The CSR Compliance Committee is a sub-committee of the CEC with specific responsibility for setting and overseeing compliance with the standards for group CSR performance through the development, dissemination, adoption and implementation of group policies and other operational measures. It is also responsible for identifying and monitoring EHS, social and governance risks. The committee meets four times per year and comprises division directors, the Director of Environment, Health and Safety, Group Systems and Human Resources, the Company Secretary and senior representatives of Group Legal, Internal Audit and Group EHS. A summary of the CSR Compliance Committee’s activities is presented to the board once a year by the Chairman of the Committee.

A separate committee in the US (the North American Compliance Committee, NACC) manages compliance issues within North America. It comprises senior management from the US businesses and meets quarterly. The role of the US committee is to ensure that legal and regulatory compliance is fully achieved. It is responsible for reviewing Johnson Matthey’s policies in these areas and for ensuring all relevant employees are aware of these policies and their roles and responsibilities.

The Audit Committee reviews the business risks associated with CSR at least once a year and monitors performance through the annual control self assessment process conducted by Johnson Matthey’s internal audit function.

Where possible, Johnson Matthey uses a rigorous scientific approach in understanding the risks to health and the environment associated with its operations and the products that it provides to the marketplace. In the absence of this scientific data, and where appropriate, the company uses the precautionary principle in its approach to the potential risks.

Enhancing Employee Understanding

We have continued to focus on employee understanding of Johnson Matthey’s policies and commitment to their implementation to maintain and enhance the reputation of the company. Compliance training for managers in their responsibilities for employees, commercial contracts and company assets has been maintained during the year through online learning programmes and seminars. Over the past two years more than 200 managers, representing around 25% of our general and executive managers worldwide, have received this compliance training through attendance at a seminar. An online version of the training has been developed and trialled during the year and is now being made available on a planned basis to all new recruits and those general and executive managers outside the US who have not attended a training seminar. In the US there is a well established programme of compliance training in place. To date, 1,980 employees have completed an online Fraud in the Workplace module and 1,626 employees have completed a Johnson Matthey Code of Conduct module.