Description of the internal control system
The Lufthansa Group’s internal control system (ICS) covers all the principles, procedures and steps intended to ensure effective, economical and accurate key processes and compliance with the relevant legal regulations. It is based on the COSO framework (Committee of the Sponsoring Organizations of the Treadway Commission). The framework defines the elements of a control system and sets the standards for measuring the appropriateness and effectiveness of the ICS. The ICS aims to ensure the reliability of operating information, compliance with internal and external requirements and the avoidance of financial losses.
The Lufthansa Group has an overarching, integrated ICS and risk management methodology with standardised processes to define the necessary controls, document them according to uniform rules and test them regularly to ensure that they are effective and appropriate.
Overall responsibility for the ICS required to manage risk lies with the Executive Board of the Lufthansa Group, which defines the scope and the format of the systems in place based on the specific requirements of the Lufthansa Group.
A central ICS unit is responsible for ongoing methodological development and implementation in the Lufthansa Group and so makes it possible to obtain a realistic opinion of the effectiveness of the internal control system at Group level. The central ICS unit is led by the Head of Corporate Controlling. It is also responsible for monitoring and coordinating the entire process so as to guarantee an appropriate and effective ICS within the Lufthansa Group. The results of the monitoring activities are reported annually in the Executive Board meetings to evaluate the Company’s overall risk situation. The Head of Corporate Controlling supports the Executive Board with the operation and monitoring of the ICS and with reporting to the Audit Committee of the Supervisory Board.
The central ICS unit prepares a report on the effectiveness of the ICS in the first quarter of the following year to comply with the legal requirements of Section 107 Paragraph 3 AktG. The report provides information to the Supervisory Board’s Audit Committee about the results of the effectiveness testing and the activities still to be completed from the previous reporting period. The company ICS officer is responsible for internal reporting within the respective companies. Ideally this takes place in the first quarter of the following year, but may vary from one company to another.
The ICS of the Lufthansa Group and its constitutive elements are covered by regular audits by the Internal Audit function. The Executive Board of Deutsche Lufthansa AG is not aware of any material or systemic matters that are inconsistent with the suitability and effectiveness of the ICS as a whole. However, it must be remembered that, irrespective of the design, an ICS cannot provide absolute assurance.