40 Corporate  Governance Executive Team Principle 7: Recognise and manage risk Risk Management Policies Supply risk making sure that AGL can source adequate  Asset operating risk Roles and responsibilities Group Risk Business units Group Audit AGL has a number of other policies that  directly or indirectly serve to reduce and/or  manage risk. These include, but are not  limited to: The CEO has primary responsibility for  designing, implementing and reporting on  AGL’s risk management framework. The  Executive Team collectively has  responsibility for promoting a risk  management culture throughout AGL,  including consistent application of the Risk  Management Policy across AGL. Recommendation 7.1  – Companies should  establish risk management policies for the  oversight of material business risks Recommendation 7.2  – Companies should  establish risk management and internal  control systems to manage material  business risk and require management to  report to the Board on the effectiveness of  these systems and the effectiveness of the  material business risks nature of its operations and the regions in  which it operates. These risks include: AGL’s business units are responsible for  maintaining effective internal controls,  consistently applying the risk management  framework, and reporting new or changed  risk events. Group Risk is responsible for supporting the  businesses to identify and implement  effective risk management processes, for  reporting details of material business risks  and risk controls to the Committee, and for  recommending changes to the Risk  Management Policy. volumes of gas and electricity on  acceptable terms to meet customer needs.  This includes making sure that we have  effective electricity hedging policies and  procedures in place. > Compliance Policy; > Market Disclosure Policy; > Code of Conduct; > Delegations of Authority Manual; > Health, Safety and Environment Policy; > Wholesale Energy Risk Management  Policy; > Treasury Policy; and > Privacy Policy. The Risk Management Policy, and the other  policies listed above, describe the roles  and responsibilities for managing risk.  This includes, as appropriate, details of  responsibilities allocated to the Board or to  the Audit and Risk Management Committee  (Committee), Executives, the business units  and AGL’s Group Audit function. making sure that AGL’s assets, particularly  electricity generation assets, operate  reliably when required. Group Audit provides assurance to the  Committee on the effectiveness of AGL’s  risk management framework and on the  adequacy and effectiveness of the system  of internal controls. the prices AGL can charge its customers  for gas and electricity are regulated in most  of the markets in which AGL operates.  AGL faces the risk that the regulated  prices will not increase at the same rate  as the costs of acquiring energy to meet  customer needs. Recommendation 7.3  – CEO and CFO  assurance on financial reporting risks Board Regulatory risk The CEO and the CFO have provided the  Board with written assurances that the  declaration provided in accordance with  section 295A of the Corporations Act is  founded on a sound system of risk  management and internal control and that  the system is operating effectively in all  material respects in relation to financial  reporting risks. The Board is responsible for reviewing and  approving changes to the Risk  Management Policy and for satisfying itself  that AGL has a sound system of risk  management and internal control that is  operating effectively. The Committee  assists the Board in carrying out these  responsibilities. Details of the operation of  the Committee are included in the  commentary on Principle 4. AGL operates in a heavily regulated industry. as an energy company, government policies  on carbon emissions will affect AGL and  its customers. The Committee oversees the detailed  analysis of the effectiveness of the system  of risk management and internal control.  The Committee receives an annual  presentation of AGL’s material business  risks and the controls in place to mitigate  the consequences of those risks. The  Committee also receives regular  presentations from management  throughout the year on specific risk topics. Committee Energy policy risk Compliance risk Principle 8: Remunerate fairly and  responsibly Financial risks The Board has established a People and  Performance Committee (equivalent to  a remuneration committee) comprising  three non-executive and independent  Directors. Max Ould (Chairman) and  Belinda Hutchinson were members  throughout the year. In March 2012,  John Stanhope replaced Sandra McPhee  as a Committee member. The Committee has responsibility for  approving the audit plan submitted annually  by Group Audit. The audit plan is based on  an assessment of AGL’s main risk exposures. making sure that AGL has the right capital  structure to provide the financial capacity  to implement its strategy. AGL systematically examines all operational  and financial activities to identify major risk  exposures using an enterprise-wide risk  program based on ISO31000, the  international standard on risk management.  This program is supported by AGL’s Risk  Management Policy. Recommendation 8.1  – The Board should  establish a remuneration committee Recommendation 8.2  – The remuneration  committee should be structured  appropriately