Areva - Reference Document 2016

REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS

4. System of internal controls

Pursuant to the initiative launched at the end of 2015 by the Chief Executive

Officer and with the full support of its governance bodies, the group continued

to deploy a program to strengthen compliance and ethics. This initiative, the

first phase of which is expected to last 18 months, is the expression of AREVA’s

determination to rise quickly to the level of the best references in this field. Within

this framework, the warning system was strengthened starting at the end of 2015

and an “individual compliance commitment letter” process was instituted for all of

the group’s executives.

To improve existing systems, the Director of Compliance published a Code of Ethics

in 2016 to replace the old Values Charter and a Compliance Policy governing

its implementation. He also put in place an anti-corruption compliance policy, a

competition legislation and regulation compliance policy, a financial compliance

and ethics policy, and an insider trading rules compliance policy.

In addition, the discovery of anomalies at the Creusot site in 2015 and 2016 was

factored into the strengthening of the compliance and ethics program and taken

into account for the continuous improvement of the internal control system.

4.1.2.

INTERNAL CONTROL STANDARDS

In the “Frame of Reference for Internal Control” of the Autorité desmarches financiers

(AMF), to which the group defers, the internal control system is characterized by:

an organization with a clear definition of responsibilities, sufficient resources and

expertise, and appropriate information systems, procedures, tools and practices;

the internal dissemination of relevant and reliable information enabling each

person to discharge his or her responsibilities;

a system to identify, analyze and manage risk;

control activities designed to reduce this risk; and

continuous monitoring of the internal control system.

The group ensured that the approach taken is consistent with the standards of the

AMF. In particular, it verified the consistency between:

the “Implementing guidelines for the internal control of accounting and financial

information published by the issuers” included in the Frame of Reference, and

the system for self-audit of internal controls within the group (Self Audit Income),

which was carried out to ensure that all the standards are met (see Section 4.6,

Continuous oversight of the internal control system

4.1.3.

INTERNAL CONTROL OBJECTIVES

Internal controls contribute to themanagement of operations. They aim in particular

to ensure:

compliance with laws and regulations;

implementation of instructions and guidelines set by the governing bodies;

the smooth functioning of the group’s internal processes, in particular those

contributing to the preservation of its assets;

the reliability and quality of the information produced and communicated, with

particular emphasis on financial information.

The scope of internal control is not limited to procedures for ensuring the reliability

of accounting and financial information.

However, no matter how well designed and implemented, internal control

mechanisms are not sufficient by themselves to guarantee with absolute certainty

that these objectives are met.

AREVA’s internal control system is consistent with the group’s commitments

regarding the conduct of its operations, particularly in the framework of its Code

of Ethics.

4.2.

ORGANIZATION, GOVERNANCE, RESOURCES, INFORMATION SYSTEMS

AND OPERATING PROCEDURES

Internal controls are implemented throughout the group by all employees under

the overall responsibility of existing governing bodies.

4.2.1.

AREVA’S ORGANIZATION

AREVA has a single corporate governance body, the Board of Directors.

In this framework, and as described in Section 3 of this report, the Board of Directors

is in charge in particular of defining the group’s strategy and validating large

capital expenditures and sensitive or significant commercial proposals, drawing

in particular on preparatory work carried out by the four standing committees it

has created and by the Ad Hoc Committee and the AREVA TA Working Group

which it created on a temporary basis (to deal with conflict of interest matters) (see

Section 3.5.

Committees of the Board of Directors

The Chief Executive Officer is responsible for the company’s executivemanagement

and represents the company in its relations with third parties. In addition to the

powers conferred on him by law, and subject to the limitations set forth in the

Articles of Association or in the Board of Directors’ Rules of Procedure, the Chief

Executive Officer is responsible for:

defining the group’s performance objectives (financial, commercial, operational,

nuclear safety, occupational safety, etc.) and their breakdown by business, and

monitoring their achievement;

allocating the group’s resources (human resources, financial resources, etc.);

defining organizational principles and processes to serve customers and build

talent.

Although the methods of control by the Board of Directors and its specialized

committees were not modified in 2016, the AREVA group nonetheless changed

the methods of internal line management of its operations as the milestones of

the Restructuring Plan rolled out by the company were met. The Restructuring

Plan is part of a broader framework for the redefinition of the respective roles and

responsibilities of French nuclear industry players decided in June 2015.

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2016 AREVA

REFERENCE DOCUMENT