67 Heineken N.V. Annual Report 2004 Report of the Executive Board Governance
In 2004, the Heineken Code of Business Conduct and Code of Whistle Blowing were issued. Various
policies and procedures have been updated, including Fraud Reporting procedure, the Funds
Planning Application procedure, the Heineken Brand Policy and the Crisis Management Manual.
Corporate role
The commonality of Heineken's operations, the development of Heineken common processes,
systems, and definitions and related performance benchmarking opportunities, facilitate Corporate
departments on setting directives and ensuring monitoring. In addition, Corporate departments
are contributing to competence development in operating companies by sharing of best practices,
common system and tool developments and training programmes. With the growth of the company
and evolving business needs, corporate departments are reviewing and adapting their activities
towards operating companies.
Shared services
Heineken is further developing shared services, mainly driven by synergies, but also strengthening
risk management and internal control. Main examples of Heineken's shared services are world-wide
technical services to breweries, contracting of raw and packaging materials by Corporate Purchasing,
back office activities with regard to Heineken's export businesses, and shared IT services for all
common system operations. Also within various operating companies, there is a movement towards
shared services, like in the widely spread wholesale businesses in Western Europe, and various sup
portive processes in regional operating companies, managing many mid-sized and smaller market
operations.
Business planning and performance monitoring
The main pillar of Heineken's internal governance activities is the business planning and performance
monitoring process. Operating companies strategy, business plan and quarterly performance report
ing are discussed with the responsible Executive Board member, taking into account the comments
from corporate function's reviews, which may include internal control issues. The approved business
plans include clear objectives, performance indicators and target setting, which provide the basis
for monitoring performance compared to plan. Heineken's regional operating companies, responsible
for managing mid-sized and smaller companies in a region, cascade the business planning and
performance monitoring cycle down to their management structures. Currently, further enhance
ments to Heineken's performance management system are progressing.
Internal control in operating companies
Heineken is progressing the group-wide development and implementation of uniform processes
and common IT systems based on best practices. At the end of 2004 the main part of the operating
companies work in accordance with the evolving Heineken common system.
In developing and implementing common systems, structured risk assessments were included
and controls established or adjusted. These internal controls ensure the integrity of the information
processing in its support of the day-to-day transaction processing, financial and management
reporting, decision-making and overall monitoring. Internal Audit reviewed the redesign and
implementation of internal control during and after the common system implementation projects.
Based on these reviews, the level of internal control of the majority of operating companies work
ing with Heineken common processes and systems is satisfactory. However, most of these operating
companies are still in a phase of optimising their internal control systems. For a few operating
companies, where the level of controls is not yet satisfactory, improvement plans and strong progress
monitoring are in place.
Various - smaller and mid-sized - Heineken operating companies, that have not yet adopted
common systems, showed progress on improving and monitoring internal control, following reports
from internal and external auditors.
