Spring Energy believes that sound governance, risk management and internal control enhance the Company’s ability to achieve its strategic objectives and create sustainable value for its shareholders and other stakeholders. The governance model is based on the Norwegian Code of Corporate Governance (“NUES”), taking into account the private limited company status and current shareholder structure. As the Company moves towards becoming a publicly listed Company, full compliance with the NUES and all Oslo Stock Exchange requirements will be sought.
Governance at the shareholder and financial market level occurs through the general meeting, investor relations activities and financial market communications, including financial reporting.
The main principles at this governance level include:
• Full and open disclosure about transactions with associates.
• Clear policy for shareholder and market communication.
• Clear procedure for representation at the general meeting through proxy.
• A nomination committee for the Board of Directors with a mandate to ensure a
competent Board representing the interests of all shareholders.
• Openness and fairness in remuneration of Board and management members.
• Policy for auditor communication with the Board without management presence.
At Board level, governance includes setting objectives and strategies for the Company. This includes establishing guidelines, instructions, policies and identi-fying risks that could adversely affect the business. The Board monitors those risks through the Enterprise Risk Management System. The Board is also responsible for operational and financial reporting as well as regulatory compliance. The Board has appointed a Chief Executive Officer (CEO) to act as the Company’s principal manager. The powers of the CEO are set out by the Board and the CEO is required to work within that mandate and report regularly to the Board.
A key governance element at the management level is the Spring Energy Business Management System, which includes formalised business processes for all main activities in the Company, including business planning, implementation and monitoring.
Detailed policies are implemented for key activities such as finance, portfolio management, investments, project management, financial reporting and HSEQ.
Enterprise Risk Management System (ERM)
Spring Energy manages risk through an ERM system which is designed to identify those events that may affect the Company’s key objectives and performance.
Spring Energy’s ERM system follows the principles outlined by COSO (Committee of Sponsoring Organisations of the Treadway Commission) COSO provides a disciplined and consistent standard against which to implement and assess a company’s ERM system. The standard is a widely accepted framework for internal control and risk management.
At the end of 2010, the Board of Spring Energy identified fifteen key commercial, financial and general risks facing the Company’s business that could affect its key business objectives. These risks have been evaluated and will be managed on a day to day basis as part of the ongoing risk management process.
The Company aims to identify and address any weaknesses or change in risk at an early stage. An element of risk is central to the activities of oil and gas exploration and development and it is the Board’s objective to be aware of the risks, to evaluate them and to mitigate them where possible, to insure against them where appropriate and to manage any residual risk.
Risk response, control activities, communication and monitoring of our key risk factors have been implemented in our Enterprise Risk Management Register. There are no risk factors that are considered to be critical at present, but the company recognises the future challenges of securing high value assets in the transaction market.
