Audit and Risk Management Committee
Terms of Reference

Committee details

Composition
The Committee will consist of at least two and no more than five non-executive directors appointed by the Board of Directors of Københavns Lufthavne A/S (Copenhagen Airports A/S) ("CPH"), one of whom will also be appointed as Chairman.

Between them, the members of the Committee shall possess such an amount of expertise and experience as to provide an updated insight into and experience in the financial, accounting and audit conditions of companies whose shares are admitted to trading on a regulated market. Moreover, one of the members shall both be independent and have appropriate qualifications within accountancy or audit. Observers will be permitted to attend the meeting as decided by the Committee.

In the event that the Executive Board of CPH consists of one registered manager only, said manager shall have the rights and duties in the Committee otherwise vested in the CEO and in the CFO.  

Chairman
The Chairman of the Committee will be appointed by the Board of Directors. The Chairman of the Board of Directors shall not be Chairman of the Committee.

Term
Members of the Committee will be appointed by the Board of Directors for an initial term of three years and must not hold office (without re-appointment) past the first Board meeting following the third anniversary of their appointment after which the member will be eligible for reappointment for one or more further terms of three years.

Quorum
A quorum will consist of a majority of Committee members.

Management attendance
Meetings will normally be attended by the CFO, unless the auditors request to speak with the Committee in the absence of the Executive Board.

Auditor attendance
The Committee and the Board of Directors must meet with the external auditor without the presence of the Executive Board at least once annually.

Meeting frequency
Meetings will be held quarterly and otherwise on an "as needs" basis as determined by the Chairman. The Chairman is required to call a meeting of the Committee if requested to do so by any member of the Committee or by the auditors. Meetings will be convened by the Chairman, generally not giving less than eight days' notice.

Reporting
If requested by the Board of Directors the Committee will prepare a report to the Board of Directors summarizing the work performed by the Committee to fully discharge its duties during the year.

Professional advice
The Committee may at any time obtain professional advice to assist it in carrying out any of its functions.

Access
The Committee will have unlimited access within the scope of its terms of reference to the auditors, to the Executive Board and to other members of senior management.

Group mandate
The Committee will, in addition to considering issues relating to CPH, also give consideration to issues affecting the other companies in the CPH group of companies (including both wholly and majority owned subsidiaries) (the "CPH Group").

Reference to CPH in these terms of reference should, where appropriate, be read to include the CPH Group.

Committee functions

The primary objective of the Committee will be to assist the Board of Directors in fulfilling its responsibilities relating to the accounting, reporting, and auditing as well as control and risk management of CPH. However the Committee will not be considering or reviewing the business plan or corporate budget.

Financial reporting
The Committee will review the interim results and the annual accounts to ensure their accuracy and timeliness and review the accounting policies of CPH and reporting requirements. It will have a program establishment and supervisory role with respect to the auditors and to the audit of CPH, providing a link between the auditors and the Board.

This will involve:

  • Reviewing the financial statements, valuations and reporting, etc. with the CFO and the internal and external auditors, and, if appropriate, recommend acceptance to the Board
  • Monitoring the financial performance of CPH
  • Serving as an independent and objective party to review the financial information presented by the Executive Board to shareholders, regulators and the general public
  • Reviewing all written financial reports to be made to the public prior to their release
  • Reviewing and approving all significant accounting policy changes

and thereafter make such recommendations to the Board as it considers appropriate.

Prior to the approval of the annual report and other financial reports, the Committee must monitor and report to the Board of Directors about:  

  • Significant accounting policies
  • Significant accounting estimates
  • Related party transactions
  • Uncertainties and risks, including in relation to the outlook.

Interaction with the auditors
The Committee has an oversight and appraisal role with respect to the auditors and the audit of the accounts of CPH. 

This will involve:

  • Recommending to the Board the appointment of external auditors
  • Maintaining, by scheduling regular meetings, open lines of communication between the Board of Directors and the external auditors to exchange views and information, as well as confirm their respective authority and responsibilities
  • Reviewing the terms of the external audit engagement
  • Reviewing the audit plan of the external auditors; evaluating the overall effectiveness of the external audit
  • Determining that no restrictions by the Executive Board are being placed upon the auditors
  • Evaluating the adequacy and effectiveness of the administrative, operating and accounting policies of CPH through active communication with the Executive Board and the auditors
  • Requiring reports from the Executive Board and the auditors on any significant proposed regulatory, accounting or reporting issues, to assess the potential impact upon the financial reporting process of CPH
  • Determining the adequacy of the audit procedures of CPH including (but not limited to) administrative, operating and accounting controls
  • Assess on an annual basis the need for establishing an internal audit function
  • Formulate recommendations on selecting, appointing and removing the head of the internal audit function and on the budget of the internal audit function, if such an internal audit function is established
  • Monitor the Executive Board's follow-up on the conclusions and recommendations of the internal audit function, if such an internal audit function is established
  • Evaluating the adequacy of the accounting and internal control system of CPH by reviewing written reports from the auditors, and monitoring the Executive Board's responses and actions to correct any noted deficiencies

and reporting to the Board as appropriate.

The Committee will also oversee the development of, monitor and make recommendations to the Board in relation to the independence of the external auditor, including, in particular, with respect to the rendering of additional services to the CPH Group. 

Maintenance of internal controls
The Committee is to oversee the monitoring of systems of internal control at CPH so as to obtain early warning of system weaknesses. This will include:

  • Assisting and monitoring compliance with the corporate control environment
  • Evaluating the exposure of CPH to, and overseeing controls to minimise, fraud
  • Overseeing the ethical policies and practices of CPH
  • Understanding the risks of the business
  • Understanding organisation practices for the Executive Board and mandatory regulatory compliance.

Risk management
The Committee is also required: 

  • To identify the most important business risks, including, but not limited to, environmental, security and safety risks, associated with the realisation of CPH's strategy and overall goals as well as risks associated with financial reporting
  • To receive and consider proposals relating to the risk management policy at CPH
  • Having considered and finalised this proposal, to make such recommendations to the Board of Directors as the Committee considers appropriate
  • After approval of the risk management policy by the Board of Directors, to monitor its implementation in consultation with the CEO and CFO
  • Monitor that the Executive Board reports to the Board of Directors on the development within the most important areas of risk and compliance with adopted policies, frameworks etc. in order to enable the Board of Directors to track the development and make necessary decisions.

Environment
The Committee will consider reports and proposals in relation to:

  • The development and revision of environmental policies and strategies, to ensure compliance with relevant legislation
  • The resources required to implement environmental policies and strategies
  • The manner in which such policies and strategies are to be communicated to users of the airports and the public generally,

and will make such recommendations to the Board of Directors as it considers appropriate.

The Committee will monitor and report to the Board of Directors on the performance of any environmental management system in place from time to time.

Occupational health and safety
The Committee will consider reports and proposals in relation to:

  • The development and revision of CPH's health and safety policies and strategies, to ensure compliance with relevant legislation and to reduce the risk of injury and damage through accidents to airport users, tenants and staff
  • The resources required to implement those policies and strategies

and will make such recommendations to the Board of Directors as it considers appropriate.

Airport security
The Committe will consider reports and proposals in relation to:

  • Significant changes in legislation and public policy which may impact on the responsibilities and liabilities of CPH in this area
  • The capacity of airport security arrangements to cope with large numbers of people
  • Significant security issues which arise from and trends in:
    • Aviation security identification card audits
    • Terrorist threats
    • Reports on security exercises
    • Security audit reports by relevant regulators
    • Breaches of security in restricted/sterile areas
    • Crime statistics

and report to the Board of Directors on the above any other matters relating to security that the Board of Directors requests that the Committee consider.

The Committee will monitor and report to the Board of Directors on CPH's discharge of its security obligations.

Aviation Safety
The Committee will obtain and consider reports in relation to the:

  • Reporting structures in place for bringing any breakdown in, or potential failure of, the aviation safety regulations or security system at the airport to the immediate attention of the Executive Board
  • Establishment of an airside safety policy involving all staff
  • Separation of the safety audit function from operational responsibility
  • Development of a total airport safety plan which is based on:
    • Existing EU and international safety policies and procedures
    • Comprehensive risk assessment program
    • Setting standards which can be measured and are realistic
  • Promulgation of comprehensive operational safety accountabilities for all personnel involved in airport operational safety
  • Establishment of a safety culture which ensures
    • Competency and proper control commitment from all personnel
    • Cooperation and coordination between all those operating airside
    • Communication to ensure the high profile of safety with alt personnel;
  • Measurement of performance against the standards which will comprise both active monitoring to ensure that standards are being met and in the event of the unforeseen, reactive monitoring to ensure that lessons are learned
  • Auditing to ensure that standards set are being met and remain appropriate in the context of legislation, technology, benchmarking and safe practices. In that context some of the key factors in meeting the safety requirements of CPH will be:
    • Periodic safety auditing by sources independent of line management and additional to checks by relevant regulators
    • Reporting of safety performance at Board of Directors level
    • Benchmarking of safety performance against industry standards
    • Leadership of safety management across all airside operations,

and report to the Board of Directors on the above and on any other matters relating to safety that the Board of Directors requests that the Committee consider.

The Committee will monitor and report to the Board of Directors on CPH's discharge of its safety obligations.

Special projects
The Committee may initiate special audit projects or investigations relating to any aspect of the operations of CPH from time to time.

It may also review any regulatory reports submitted to CPH and monitor the Executive Board's response to them.