Hudaco Industries Ltd

The executive committee is chaired by the chief executive, Graham Dunford, and meets quarterly, prior to the board meeting. Its principal terms of reference are to advise the chief executive on the formulation of operating policy, the implementation of group strategy and the management of key group risks. The committee incorporates a quality, health, safety and environment subcommittee which has its own written terms of reference.

The social and ethics committee's terms of reference were reviewed during October 2023. [...] The social and ethics committee confirms that it has discharged its mandate as prescribed by the Companies Regulations to the Companies Act. Management has confirmed that there has been no material non-compliance with legislation or regulations which are within the remit of the committee's mandate. In addition, there have not been any infringements of the relevant governance codes, and no material issues were identified during the year under review. Accordingly, the social and ethics committee confirmed that Hudaco remains a responsible corporate citizen and that the group will continue its efforts to further create value and contribute positively to the environment, social and governance imperatives. [...] At the forthcoming annual general meeting, scheduled to take place on 27 March 2024, the chairman of the social and ethics committee will be available to report to shareholders on the matters within the committee's mandate in accordance with regulation 43(5)(c) of the Companies Act. [...] Focus areas for 2024 include continuing to monitor the group's implementation of health and safety standards and environmental impact initiatives and compliance with the Competition and POPI Acts. The B-BBEE scorecard will also continue to be an area of focus, as will social initiatives, particularly in the field of education. The committee is cognizant of, and will respond as and when appropriate to, proposed amendments to the Companies Act which, if promulgated, will: n affect the composition of the committee and the way in which its members are appointed; and n potentially increase the committee's duties pertaining to remuneration and the remuneration gap.

Hudaco Industries is committed to maintaining a high standard of corporate governance and to creating value for stakeholders in a balanced, ethical and sustainable manner. The board seeks to ensure that good governance is practiced at all levels in the group and that it is an integral part of Hudaco's operations. [...] The audit and risk management committee and the board assess the risks in the group's business environment with a view to eliminating or reducing them in the context of the group's strategies, operations and risk appetite. The board has confirmed its acceptance of the group's risk management processes and is satisfied that all risks are appropriately governed. [...] An operational risk management committee, chaired by the group financial director and comprising, inter alia, all the managing directors of the various businesses, facilitates the group's risk management programme. This committee meets twice a year prior to the audit and risk management committee and provides valuable insight into the status of risk practices within the group, including IT governance.

The audit and risk management committee further oversees that a combined assurance model is applied which enables an effective internal control environment, supports the integrity of information used for internal decision-making and supports the integrity of related external reports. Through formal reports in committee papers and the attendance of all key executives involved with assurance, the audit and risk management committee is provided with a thorough review of the group's assurance activities. These reports include the principles of combined assurance through reports from management and internal and external audit. Attendees at audit and risk management committee meetings include the chairman of the board, all executive directors, the head of group risk and internal audit, the internal audit manager and external audit representatives. During the year, the combined assurance model was reviewed, and the committee was satisfied that the financial risks and financial reporting risks were appropriately reflected therein. [...] From a risk management perspective, the audit and risk management committee's main responsibilities include overseeing the group's risk management programme. The responsibility for identifying, evaluating and managing risk resides with management. The risk management process involves a formalised system to identify and assess risk, both at strategic and operational levels. The process includes the evaluation of the mitigating controls and other assurances in identifying and assessing the risks. Risks are continually being identified and mitigated in terms of a process that involves allocating responsibility, developing action plans and monitoring compliance with these action plans. Every employee has a role to play in this endeavour and in achieving the group's goals and objectives. During the year under review, the audit and risk management committee discharged all of its duties in respect of risk management. Specifically, it: n concluded that appropriate systems were in place to identify and monitor risks affecting the group; n evaluated the adequacy of the effectiveness of the risk management process; n reviewed and assessed issues such as compliance with legislation and corporate governance matters, the impact that significant litigation could have on the group, the adequacy of the insurance cover as well as the effectiveness of controls over areas of risk; n provided board-level oversight of the management of sustainability issues; and n satisfied itself that technology and information governance continued to form an integral part of the company's risk management processes.

The executive committee is chaired by the chief executive, Graham Dunford, and meets quarterly, prior to the board meeting. Its principal terms of reference are to advise the chief executive on the formulation of operating policy, the implementation of group strategy and the management of group risks.

The audit and risk management committee and the board assess the risks in the group's business environment with a view to eliminating or reducing them in the context of the group's strategies, operations and risk appetite. The board has confirmed its acceptance of the group's risk management processes and is satisfied that all risks are appropriately governed. The major risks faced by the group are described on pages 18 and 19 of this integrated report. The group's annual internal audit plan incorporates the outcomes of the risk management process. The group risk and internal audit department provides a risk identification facilitation role, but to maintain their independence, the internal audit team members do not participate in this process. Management is responsible for managing risks on a daily and operational basis. The board is responsible for determining the group's risk appetite and tolerance levels. These have been defined and approved. The group risk map, examined by the board at each meeting, includes a risk tolerance line to highlight whether any residual risks fall beyond the risk tolerance level. An operational risk management committee, chaired by the group financial director and comprising, inter alia, all the managing directors of the various businesses, facilitates the group's risk management programme. This committee meets twice a year prior to the audit and risk management committee and provides valuable insight into the status of risk practices within the group, including IT governance. During 2022, an independent assessment of Hudaco's enterprise risk management was conducted by a practicing risk management professional, who Is the head of risk at another group listed on the JSE. The objective of the review was to assess the adequacy and effectiveness of risk management within the Hudaco group. The very pleasing conclusion by the independent reviewer included the following statements: _"A common theme that pervaded all interactions with the leaders across the group was that ERM is viewed as a practical enabler to the success of the business, which is precisely the objective of any ERM program. Another key observation across all discussions was a deep desire to constantly improve everything that Hudaco embarks on, a mindset that in my opinion lends itself to excellent risk management._ _I am therefore able to satisfy myself that Hudaco's ERM program not only meets but exceeds King 4 requirements, more specifically principle 11 ie. "The governing body should govern risk in a way that supports the organisation in setting and achieving strategic objectives"."

The social and ethics committee's terms of reference were reviewed during October 2023. [...] The social and ethics committee confirms that it has discharged its mandate as prescribed by the Companies Regulations to the Companies Act. Management has confirmed that there has been no material non-compliance with legislation or regulations which are within the remit of the committee's mandate. In addition, there have not been any infringements of the relevant governance codes, and no material issues were identified during the year under review. Accordingly, the social and ethics committee confirmed that Hudaco remains a responsible corporate citizen and that the group will continue its efforts to further create value and contribute positively to the environment, social and governance imperatives. [...] Focus areas for 2024 include continuing to monitor the group's implementation of health and safety standards and environmental impact initiatives and compliance with the Competition and POPI Acts. The B-BBEE scorecard will also continue to be an area of focus, as will social initiatives, particularly in the field of education. The committee is cognizant of, and will respond as and when appropriate to, proposed amendments to the Companies Act which, if promulgated, will: n affect the composition of the committee and the way in which its members are appointed; and n potentially increase the committee's duties pertaining to remuneration and the remuneration gap.