DPE Shareholder Oversight
& Risk Management
SOE Regulatory Environment
Companies Act
• Memorandum and
Articles of
Association / MOI
SOE
enabling
Legislation
Public Finance
Other general
Management Act,1
legislation,
of 1999
* Treasury Regulations
* Shareholders
Compact
* Significance and
Materiality Framework
* Corporate Plan
guidelines and
Sector legislation and
policies (e.g. Electricity
Act, Electronic
Communications Act)
policies (e.g. tax,
King III
Public Audit Act
labour,
environmental
laws)
* Responsible
Corporate citizen
2
The shareholder has specific powers and responsibilities in the SOE governance
system
Parliament
Transparency and
accountability
Presidency
Performance of Minister of
Public Enterprises
Shareholder
Executive Authority
Companies
Act & PFMA
establishes
relationship
Shareholder Management
Defines powers and responsibilities of
shareholder viz a viz the Board and
Management
Board
Accounting Authority
Management Agreement
Board cascades delegations and
performance expectations down to
management
Management
The Shareholder is primarily responsible for the
appointment of the Board
Shareholder
the appointment and removal of
directors from the Board, which
includes the appointment of executive
directors (CEO and CFO) who are
appointed ex officio; and
Board
The Board as the custodian of the
company is expected to act in the best
interests of the SOE and the shareholder.
Management
Management and control of a
company falls under the Board of
Directors in terms of both the
Companies Act and the Articles.
The Executive Management (represented by
the CEO and CFO) is accountable to the Board
and the Board is accountable to the
shareholder. Thus the Board would manage
the performance of these executives.
approving the remuneration of
directors
The Board has an oversight role to review
and monitor management’s conduct of the
company affairs and operations, its
delivery and achievement of strategic,
business, operations and financial goals
and other objectives.
Executive management is appointed and
managed as part of an employment
relationship governed by employment law and
Human Resource principles.
4
Shareholder Expectations and Governance Framework:
Contents
• SOE stakeholder/accountability structure
• DPE Statutory mandate for SOE Oversight
• PFMA & National Treasury Regulations
• Company Law
Annual General
Meetings
Investor Brief
Quarterly reports and
Annual Financial
Statements
Shareholder
compact
DPE
GOVERNANCE
TOOLS
Corporate Plan
Strategic Intent
Statement
Significance and
materiality Framework
Transaction guidelines and
section 54 Approvals
Board performance
evaluations and
attendance
Board appointments
and remuneration
Strategic SOE oversight
•Annual performance agreements between the Minister and the Board and
signed at the AGM
Shareholder
compacts (TR
29.2)
•Required to document mandated key performance measures and indicators
agreed between the Minister and the Board
•Should also include Board objectives and Board effectiveness assessment
•Prepared and submitted by the Board and Covers a 3 year period
•Sets out the
Corporate
Plans (§52
PFMA and TR
29.1)
• strategic objectives and outcomes agreed in the shareholders’ compact;
•SOE strategic and business initiatives interpreting SOE’s mandate;
•KPIs,
•Risk mitigation plan, fraud prevention plan; materiality and significance framework
and a financial plan
•Any additional information requested by the Minister
•Facilitate effective performance monitoring, evaluation and corrective action
•DPE analysis to determine progress with implementing Compact i.r.t agreed mandate and KPIs
Quarterly (TR
29.3) and Annual
reports (§55
PFMA and §286
Companies Act
•Electronic Dashboard established for timely reporting by SOE to monitor trends
•(in financial and operational performance, capital investment programme, environmental impact
assessments, socio-economic, governance, skills development, competitive supplier development
programme and property disposals)
•Key issues: timeous information that is accurate and relevant
8
Strategic SOE Oversight Cont…
• DPE has developed additional performance monitoring and evaluation
systems:
•
Strategic intent statements:
• primary communication tool of the State’s expectation of the SOE strategy
• Contains the SOE’s strategic purpose, scope of business, core business
consultation thresholds or investment strategy;
• DPE to consult with sector and policy department, NT and the National Planning
Commission to determine SOE strategy.
• Investor Briefs
• Issued by Minister to SOE Boards quarterly advising them of performance trends
and highlighting the need for corrective action in the event of any deviation from the
agreed key performance areas and indicators.
• Boards are expected to respond indicating measures to address highlighted
concerns or mitigate emerging risks.
9
Performance Monitoring & Evaluation
• DPE has an obligation to review the performance of SOE.
• DPE monitors SOE performance on a quarterly and annual basis.
• Corporate plan risk assessment done in reference to the mandate and
strategic objectives of the SOE (assessment of what events or
conditions have prevented or what uncertainties could prevent the SOE
of meeting the set objectives)
• Quarterly & annual reports analysed to determine whether SOE
performance is on track with the corporate plans, whether strategic
objectives have been met and to highlight any emerging risks.
The shareholder management process integrates national strategic
objectives into SOE planning and operations
Strategic
Intent
Statement
Shareholder
Compact
Corporate
Plan
• Primary tool to communicate State’s expectations of SOE strategy
• Intragovernmental consultations with sector depts, NT and the Presidency to ensure clarity and
transparency of objectives for the SOE and articulation of trade-offs between policy, regulatory,
customer and SOE financial interests.
• Minister and SOE Board conclude a shareholder compact annually (Treasury Regulation 29.2) .
• Documents the mandated key performance measures and indicators to be attained by the SOE in
delivering the desired outcomes and objectives as agreed between the SOE Board and the Minister.
• SOE submit corporate plans and budgets annually to Minister and National Treasury at least one month
before the start of financial year (PFMA Sec 52).
• DPE assesses SOE corporate plans to determine whether the strategies and financial plans are
consistent, coherent and aligned with government objectives, degree of sensitivity to assumptions in
the forecasts to assess financial support and borrowing required as well as the timing thereof.
DPE reviews SOE performance (Treasury Regulation 29.3)
Isibuko Dashboard
Performance Minister issues Investor Briefs to SOE Boards on emerging SOE performance trends, highlighting need
Monitoring & for corrective action in event of any deviation from agreed key performance areas and indicators.
Evaluation
SOE AGMs.
SOE reporting to Parliament (PFMA Sec 65).
9
DPE has developed a comprehensive risk management
framework
Risk management — the comprehensive process of identifying, assessing
and responding to risks — is not an end in itself. When undertaken
effectively, it can deliver a range of benefits, by:
• improving planning processes by enabling the key focus to remain on core business and
helping to ensure continuity of service delivery;
• reducing the likelihood of potentially costly ‘surprises’ and preparing for challenging and
undesirable events and outcomes;
• improving efficiency and general performance;
• contributing to the development of a positive organisational culture, in which people and
organisations understand their purpose, roles and direction; and
• improving accountability and governance — in relation to both decision-making and
outcomes. This is particularly important for public sector entities, which exist to deliver
outcomes for the benefit of the public.
Risk Management
Key questions to consider in undertaking this analysis include:
• the type of risk – technological, financial, safety etc;
• the source of risk – external (political, economic, natural disasters)
or internal (reputation, security, knowledge management, etc);
• what is at risk – area of impact and the type of exposure (people,
reputation, operational results, assets etc); and
• the level of control – the degree to which the agency can influence,
affect or manage the risk.
Risk Management
The risk management process consists of the following main steps:
1. Objective setting (what is our mandate, objectives, etc)
2. Risk identification (what can go wrong, what can prevent objectives
being achieved, causes of risk?)
3. Risk analysis (what are the chances of the risk occurring
[LIKELIHOOD], what will be the effect when it occurs (IMPACT]).
4. Risk response (avoid, accept, reduce or share the risk by developing
controls, procedures, etc to reduce risk to acceptable levels).
5. Control activities (policies and procedures are established and
implemented to ensure the risk responses are effectively carried out).
6. Information and communication (information is captured and
communicated so that people are able to carry out their risk
management duties).
7. Monitoring (ongoing management activities and separate evaluations).
12
Risk Management
Isibuko business intelligence dashboard system has been implemented
to allow for timely reporting by SOE and for SOE performance
assessment by DPE.
• Risk assessed at 3 levels:
• SOE
• DPE
• Portfolio
Risk Identification & Description
Risk Treatment & Assessment
Charts are used to determine the change in ratings over time
Risks can be clearly plotted and ranked
17
The risk profile of the SOE portfolio seems to be improving
18
Thank You