Which of the following is not an internal control that ensures effective corporation governance

Accountability & Audit

Accountability

Risk Management and Internal Controls

Principle 9: The Board is responsible for the governance of risk and ensures that Management maintains a sound system of risk management and internal controls, to safeguard the interests of the company and its shareholders.

Corporate Governance Practices of the Company

The Board has instituted risk tolerance levels to guide Management in the course of operations and achieving its strategic objectives. These tolerance levels were drafted based on the top risks identified by the Enterprise Risk Management (“ERM”) committee. Board approval is required for initiatives involving greater risk exposures that exceed the predetermined levels. The Group’s Investment Guideline Policy sets out the policies and guidelines for investments of more than S$500,000. Pursuant to the Investment Guideline Policy, all investments must be initiated by the Directors and assisted by the Treasury Division of the Finance department and Corporate Legal Manager of the Company. Once a potential investment is identified, the target will be brought to the attention of the Board in writing or during a board meeting. A working group which includes but is not limited to the management, legal counsel, certified public accountants, as well as relevant employees which the directors assign to be in the working group, will be formed. A financial adviser may also be involved for material transactions where appropriate. Upon completion of the due diligence and valuation exercises, the working group will present the final investment proposal to the Board for approval. In accordance with Chapter 10 of the Listing Manual of the SGX-ST, the investment may also be conditional upon the approval of the Company’s shareholders and the SGX-ST. Completed investments will be analysed during the board meetings on a half-yearly basis as part of the enterprise risk management updates.

The ERM Committee comprises the Executive Director and Chief Operating Officer – Mr Huang Ban Chin, department heads and chaired by the Lead Independent Director – Mr Lee Sen Choon who assists the Board on risk management. The key components of the Company’s risk management framework include:

• Risks assessment – Risks that the Company is exposed to are identified, assessed and updated in the risk register. The risks are rated and ranked according to the likelihood and its impact. Top risks are highlighted for extra emphasis.
• Risks monitoring – Risks are monitored through internal audits, internal reviews, questionnaires circulated to subsidiary management and the control self-assessment (“CSA”) programme.
• Risks response & risks reporting – The ERM committee holds regular meetings to discuss risk issues, new initiatives and reports material findings uncovered from risk monitoring. These meetings are thoroughly minuted and form part of the Board papers presented to the Board. Key risks exposures and statuses are also compiled in a risk reporting summary and submitted for Board review.

The top 5 risks faced by the Group are identified below:

1. Epidemic outbreaks in the countries we operate in, requiring focus on protection of our sales channels and staff safety.
   Most recently, the Covid-19 pandemic has been disrupting business landscapes globally. Unprecedented and highly contagious, it has caused lockdowns of cities and country borders all over the world. Due to its scale, it is managed at a government level, with national policies being rolled out for compliance. Businesses are forced to adopt social distancing measures and explore online sales channels to avoid physical contact and virus spread. We continue to invest in our IT infrastructure to bring our business online and monitor government policies closely to do our part to prevent virus spread and protect our staff from the pandemic.
2. Sudden discontinuation of key products
   Although BWI has a wide range of products, a few products within the range form the major part of revenue. For example, our DR Secret range of skincare products form the major part of our revenue. Discontinuation of products can arise because of restrictions of certain product ingredients imposed by the authorities. These changes in regulations are not controllable by BWI and unfavourable changes can occur despite having met initial requirements. The product development team keeps track of regulatory requirements of the countries that the company operates in. BWI also engages agents in those countries to advise on local requirements and updates. The product development team consistently seeks to enlarge the product range to reduce reliance on any single product. Moreover, we have alternative suppliers for our key products who are ready to cover the shortfall should any supplier fail.
3. Disruption in supply
   Our head office supplies the regional centers with inventory. A forecast is prepared by the regional centre to enable head office to determine how much should be ordered from the supplier. As these forecasts are based on estimates, the regional centers risk facing stock shortage when sales exceed their forecast. On the other hand, ordering too much resulted in higher storage costs and stock obsolescence. We regularly review sales forecasts, monitor custom regulations, maintain buffer stocks and work with our suppliers to minimize disruptions.
4. Non-compliance with regulatory requirements
   As regulations catch up with the business landscape, regulatory requirements have not only increased both in scope and depth but are accompanied by tight deadlines. As BWI operates in more countries, these deadlines if not met by any subsidiary, may lead to non- compliance of regulatory requirements, hence presenting a more significant risk to the Group. The Group monitors the compliance of such requirements and where necessary, seek the advice of local consulting firms on matters that require significant expertise. Internal and external audits are conducted periodically to monitor the entities' operations.
5. Unfavourable foreign exchange movement
   As the Group operates internationally, revenue is generated in various currencies. Although subsidiaries are required to remit excess cash, the company still has foreign currency exposure should local currency fluctuate significantly against the Singapore dollar. BWI monitors monetary policy changes, major currency exposures and attempt to fix rates where feasible to minimize unfavourable exchange rate fluctuations.

The CSA programme established provides a framework to obtain feedback on the state of internal controls. The programme requires subsidiaries to review and report annually on the effectiveness of controls and the control environment to HQ and significant findings are reported to the Board. Periodically, internal audit and independent reviews would be conducted to validate the self-assessments.

Based on the system of internal controls established and maintained by the Group, work performed by the internal and external auditors, and reviews performed by Management, various Board Committees, the Board, with the concurrence of the Audit Committee, is of the opinion that the Group’s internal controls, addressing financial, operational, compliance and information technology controls and risk management systems were adequate and effective as at 31 December 2021.

The internal controls maintained by the Management provide reasonable but not absolute assurance against material misstatements or loss, and the safeguarding of assets, the maintenance of proper accounting records, the reliability of financial information, compliance with relevant legislation, regulation and best practice and containment of business risk.

Assurance from the Co-Chairman, Group CEO / Managing Director, Senior Group Financial Controller and other key management personnel

The Board has received assurance from (a) the Co-Chairman, Group CEO / Managing Director and the Senior Group Financial Controller that the financial records of the Company have been properly maintained and the financial statements give a true and fair view of the Company’s operations and finances; and (b) the Co-Chairman, Group CEO / Managing Director and other key management personnel who are responsible, regarding the adequacy and effectiveness of the Company’s risk management and internal control systems.

Audit Committee

Principle 10: The Board has an Audit Committee ("AC") which discharges its duties objectively.

Corporate Governance Practices of the Company

Duties of AC

The AC assists the Board in discharging its responsibility to safeguard the Company’s assets, maintain adequate accounting records, develop and maintain effective systems of internal control. The duties of the AC are as follows:

External Audit

1. review with the external auditors and Management on the following:-
   1. the audit plan;
   2. significant financial reporting issues and judgments so as to ensure integrity of the financial statements of the company and any announcements relating to the company’s financial performance;
   3. their audit report;
   4. their management letter and Management’s response
2. ensure co-ordination where more than one audit firm is involved;
3. review the quarterly, half-year and annual financial statements and earnings releases before submission to the Board for approval;
4. meet with the external auditors and internal auditors at least once a year in the absence of Management to discuss issues arising from the audit, including the assistance given by the Management to the auditors;
5. report to the Board its findings from time to time on matters arising and requiring the attention of the AC;
6. undertake such other reviews and projects as may be requested by the Board;
7. undertake such other functions and duties as may be required by statute or the Listing Manual, and by such amendments made thereto from time to time;
8. consider and recommend to the Board, the appointment / re-appointment and removal of the external auditors, and approving the remuneration and terms of engagement of the external auditors;
9. review the independence of the external auditors annually and the aggregate amount of fees paid to the external auditors for that financial year and a breakdown of the fees paid in total for audit and non-audit services; and
10. ensure that the External Auditor has direct and unrestricted access to the Chairman of the Board and the AC.

Internal Audit

1. review and report to the Board at least annually on the adequacy and effectiveness of the Company’s risk management and internal controls, including financial, operational, compliance and information technology controls;
2. review internal audit programme and the scope and results of the internal audit and its effectiveness;
3. review the appointment, removal, evaluation and compensation of the internal audit function;
4. review and monitor Management’s responsiveness to the internal audit findings and recommendation; and
5. ensure that the Head of Internal Audit has direct and unrestricted access to the Chairman of the Board and the AC.

Interested Person Transactions ("IPT")

1. approve the internal control procedures and arrangements for all future related party transactions to ensure that they are carried out on arm’s length basis and on normal commercial terms;
2. review transactions falling within the scope of Chapter 9 (Interested Person Transactions);
3. consider the need for a general mandate for IPT and obtain independent advisory support, if required;
4. where a general mandate is being renewed, consider if the basis of determining the transaction process is adequate to ensure fair transaction terms;
5. direct Management to present the rationale, cost-benefit analysis and other details relating to IPT subject to specific mandate; and
6. receive report from Management and internal audit on IPT.

Internal Control

1. assess the effectiveness of the internal control and risk management systems established by the Management to identify, assess, manage and disclose financial and non-financial risks at least once a year;
2. review the statements included in the annual report on the Group’s internal controls and risk management framework;
3. review reports from Management and internal auditors on the effectiveness of the systems for internal control, financial reporting and risk management; and
4. review the Group’s procedures for detecting fraud and whistleblowing, and ensure that arrangements are in place by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters.

Risk Management

1. advise the Board on the Group’s overall risk tolerance and strategy;
2. oversee and advise the Board on the current risk exposures and future risk strategy of the Group;
3. in relation to risk assessment, (i) keep under review the Group’s overall risk assessment processes that inform the Board’s decision making; (ii) review regularly and approve the parameters used in these measures and the methodology adopted; and (iii) set a process for the accurate and timely monitoring of large exposures and certain risk types of critical importance;
4. review the Group’s capability to identify and manage new risk types;
5. before a decision to proceed is taken by the Board, advise the Board on proposed strategic transactions, focusing particularly on risk aspects and implications for the risk tolerance of the Group, and taking independent external advice where appropriate and available;
6. provide advice to the Remuneration Committee on risk weightings to be applied to performance objectives incorporated in executive remuneration;
7. review promptly all relevant risk reports on the Group; and
8. review and monitor the Management’s responsiveness to the findings.

Apart from the above duties, the AC will commission and review the findings of internal investigations into matters where there is suspicion of fraud or irregularity, or failure of internal controls or infringement of any Singapore law or regulation or rules of the SGX-ST or any other regulatory authority in Singapore which has or is likely to have a material impact on the operating results and/or financial position.

In performing its duties, the AC:

1. has met with the internal and external auditors, without the presence of management, at least once a year;
2. has explicit authority to investigate any matter within its terms of reference;
3. has had full access to and cooperation from Management and has full discretion to invite any director and executive officer to attend its meetings; and
4. has been given reasonable resources to enable it to discharge its functions properly.

The AC noted that there were no non-audit services provided by the external auditors to the Company in FY2021 that may impair the independence or objectivity of the external auditors of the Company. As at 31 December 2021, total fees paid/payable amounted to S$485,948, fully comprising of audit fees.

The AC had recommended to the Board that the auditor, Nexia TS Public Accounting Corporation, be nominated for re-appointment as auditor at the forthcoming AGM of the Company.

The auditor, Nexia TS Public Accounting Corporation, have indicated their willingness to accept reappointment.

In recommending the re-appointment of the auditor, the Audit Committee considered and reviewed various factors including the adequacy of resources, the experience of the auditing firm and the audit engagement partner, the firm’s other audit engagements, the number and experience of supervisory and professional staff to be assigned to the audit, the size and complexity of the Group and its businesses and operations. Accordingly, the AC has recommended the re-appointment of Nexia TS Public Accounting Corporation as external auditors at the AGM of the Company.

The Group has a whistle blowing policy where employees may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The policy establishes a confidential line of communication for the reporting of issues/concerns to any one of the Audit Committee members or the HQ Compliance Team and provides for the protection of those who raise a concern in good faith against harassment or victimization. The complainant's identity shall also be kept confidential to the extent reasonably practical within the limits of the law.

The Audit Committee is the custodian of the policy and responsible for the overall oversight and monitoring of the policy and its implementation. The policy sets out the procedures and processes by which the HQ Compliance Team assesses and reviews (in consultation with the Audit Committee and/or ERM committee where appropriate or necessary) the nature of the complaint, the appropriate independent investigation to be conducted, the outcome of such investigation and the follow up action to be taken. There was no reported incident pertaining to the whistle blowing policy in FY2021.

Summary of AC's activities in FY2021

1. reviewed the financial statements of the Company before the announcement of the Company’s quarterly and full-year results;
2. together with the COO and Senior Group Financial Controller and where applicable, the external auditors, reviewed the key areas of Management’s judgment applied for adequate provisioning and disclosure, critical accounting policies and any significant changes made that would have a material impact on the financials;
3. reviewed and approved both the Group internal auditor’s and external auditor’s plans to ensure that the plans covered sufficiently in terms of audit scope in reviewing the significant internal controls comprising financial, operational, information technology and compliance controls of the Company;
4. reviewed the independence and objectivity of the internal and external auditors through discussions with the internal and external auditors;
5. reviewed non-audit fees;
6. reviewed the appointment of different auditors for its subsidiaries;
7. reviewed the accounting, auditing and financial reporting matters so as to ensure that an effective system of control is maintained in the Group;
8. reviewed the internal audit functions and discussed accounting implications of major transactions including significant financial reporting issues;
9. reviewed interested party transactions;
10. reviewed with the COO, Senior Group Financial Controller and external auditors on the changes to accounting standards and issues which are relevant to the Group and have a direct impact on the Group’s financial statements; and
11. reviewed the statement of financial position of the Company and the consolidated financial statements of the Group for the financial year ended 31 December 2021 as well as the Independent Auditor’s Report thereon before submitting them to the Board for its approval; and
12. reviewed the change of auditors of the Group.

Financial Reporting Matters

In the review of the financial statements for FY2021, the following significant matters impacting the financial statements and its disclosures were reviewed by the Audit Committee and discussed with Management and the external auditors.

The Board and AC have reviewed the appointment of different auditors for some of its subsidiaries and significant associated companies and were satisfied that such appointment would not compromise the standard and effectiveness of the audit of the Group and that Rule 716 of the Listing Manual has been complied with. Refer to Note 16 Investment in subsidiary corporations of the Notes to the Consolidated Financial Statements for the subsidiaries audited by different auditors.

In appointing the audit firms for the Company, its subsidiaries and significant associated companies, the Audit Committee and the Board are satisfied that the Group has complied with Listing Rules 712, 715 and 716.

Composition of AC

The AC, regulated by a set of written terms of reference, comprises three NEIDs, all of whom are non-executive, and the majority of whom, including the AC Chairman, are independent.

• Chairman : Lee Sen Choon
• Member : Adrian Chan Pengee
• Member : Chester Fong Po Wai

The AC Chairman, Lee Sen Choon, has more than 30 years of experience in accounting, auditing, taxation and corporate secretarial work. The other members of the AC possess experience in finance, legal, business management and are exposed to regular updates from the relevant regulators. They are considered to be well qualified by the Board to discharge their duties in the AC.

The AC members takes measures to keep abreast of the changes to accounting standards and issues which have a direct impact on financial statements through periodic meetings with the external auditors, briefings provided by professionals or external consultants as necessary.

AC does not comprise former partners or directors of the Company’s auditing firm

None of the AC members were previous partners or directors of the Company’s existing auditing firm or auditing corporation within a period of two years commencing on the date of their ceasing to be a partner of the auditing firm or director of the auditing corporation and none of the AC members hold any financial interest in the auditing firm or auditing corporation.

Primary reporting line of the internal audit function is AC; internal audit function has unfettered access to Company’s documents, records, properties and personnel

The internal audit function of the Company is outsourced to an external consulting firm – BDO LLP, who has unfettered access to all the Company's documents, records, properties and personnel, including access to the AC. The Internal Audit methodology adopted by the internal auditors is consistent with the requirements of The Institute of Internal Auditors.

The AC has reviewed the adequacy and effectiveness of the internal audit function and is satisfied that the internal audit function is independent, effective and adequately resourced, has unfettered access to all the Group’s documents, records, properties and personnel, including the AC, and has appropriate standing within the Company. The AC is satisfied that the internal audit function is adequately resourced and is independent of the activities it audits.

The AC approves the hiring, removal, evaluation and compensation of the internal audit function. Based on risk assessments performed, greater emphasis and appropriate internal reviews are planned for high risk areas and material internal controls, including compliance with the Group’s policies, procedures and regulatory responsibilities. The internal audit plans are reviewed and approved by the AC annually.

AC meets with the auditors without the presence of Management annually

Annually, the AC meets (physically or via teleconference) separately with the internal and external auditors without the presence of Management.

Shareholder Rights and Conduct of General Meetings

Shareholder Rights and Conduct of General Meetings

Principle 11: The company treats all shareholders fairly and equitably in order to enable them to exercise shareholders' rights and have the opportunity to communicate their views on matters affecting the company. The company gives shareholders a balanced and understandable assessment of its performance, position and prospects.

Corporate Governance Practices of the Company

Company provides shareholders with the opportunity to participate effectively and vote at general meetings

Management supported the Code’s principle to encourage shareholder participation. Shareholders are encouraged to attend the AGM to ensure a high level of accountability and to stay informed of the Company’s strategy and goals. Notice of the general meeting is dispatched to shareholders, together with explanatory notes or a circular on items of special business (if necessary), at least 14 days or 21 days, as the case may be, before the general meeting. The Board welcomes questions from shareholders who have an opportunity to raise issues either informally or formally before or at the general meeting.

In general meetings, shareholders are given the opportunity to communicate their views and direct questions to Directors and Management regarding the Company. The Chairpersons of Board Committees are present at the AGM and other general meetings of shareholders, to assist the Board in addressing shareholders’ questions.

Shareholders are also given the opportunity to participate effectively and vote at general meetings of the Company, where relevant rules and procedures governing such meetings are clearly communicated to attendees.

In accordance with Rule 730A(2) of the Listing Manual and to have greater transparency in the voting process, the Company has conducted the voting of all its resolutions by poll at all of its general meetings. The detailed voting results of each of the resolutions tabled are announced on the same day after the meetings. The total numbers of votes cast for or against the resolutions are also announced after the meetings via SGXNET.

In view of the current COVID-19 situation, the Annual Report, Notice of AGM and Proxy form will be made available to shareholders solely by electronic means via publication on SGXNet and our corporate website (www.bestworld.com.sg). Our coming AGM will be held by way of electronic means. Shareholders may submit questions in advance of the AGM and appoint the Chairman of the Meeting as proxy to attend, speak and vote on their behalf at the AGM.

Separate resolution on each substantially separate issue

Resolutions to be passed at general meetings are always separate and distinct in terms of issue and are consistent with the Code’s recommendation that companies avoid ‘bundling’ resolutions unless the resolutions are interdependent and linked so as to form one significant proposal.

All Directors attend general meetings

All directors will be in attendance at the Company’s AGM to address shareholders’ questions relating to the work of the Board and Board Committees.

The Company’s external auditor, Nexia TS Public Accounting Corporation, have also been invited to attend the AGM and will be available to assist the directors in addressing any relevant queries by the shareholders relating to the conduct of the audit and the preparation and content of the auditor’s report. All directors attended the Company’s last AGM in FY2020 via electronic means on 30 September 2021.

No provision in Company’s Constitution for absentia voting of shareholders

Under the Company’s Constitution and pursuant to the Companies Act, Chapter 50 of Singapore (the “CA”), a relevant intermediary (as defined in the CA) may appoint more than two proxies to attend AGMs and any other general meeting. A registered shareholder who is not a relevant intermediary may appoint up to two proxies.

The Company has not amended the Constitution to provide for other methods of voting in absentia due to security and integrity concerns. The Company noted that provision for such other methods of voting in absentia would also require a costly system of authentication to ensure the integrity of information and the identity of shareholders in telephonic and electronic media.

Minutes of general meeting are published on the Company’s corporate website

Questions, comments received from shareholders and responses from the Board and Management were recorded in the minutes of general meetings.

In view of the requirements of COVID-19 (Temporary Measures) (Alternative Arrangements for Meetings for Companies’) Order 2020, the Company had published the minutes of its 2019 Annual General Meeting on SGXNet and the Company’s website within one month after the date of the meeting.

Dividend policy

In view of the Covid-19 pandemic, the Board has decided to temporarily suspend the implementation of any new dividend policy moving forward, as a prudent move to conserve the resources of the Company during this period of heightened economic volatility and business uncertainty. The Board and the Management will periodically assess the economic situation and the health of the Company and make further decisions or adjustments to the dividend policy as appropriate.

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