INTERNAL CONTROL OVER FINANCIAL REPORTING

Internal control over financial reporting is included as a part of the overall internal control at Trelleborg, and constitutes a central component of Trelleborg’s corporate governance. The key goals are that internal control is appropriate and effective, provides reliable reports and complies with laws and regulations.

Trelleborg’s Board of Directors has concluded that the Control activities. The most significant risks are managed current Internal Control set up is sufficient from a corporate through control structures in the Group. Management may governance perspective and that there is no need for an entail that these risks are accepted, reduced or eliminated. internal function. The control structures aim to ensure efficiency in the The starting point for the internal control process is Group’s processes and good internal control and are based the regulatory framework for internal control issued by on minimum requirements for good internal control in the Committee of Sponsoring Organizations of the defined processes. Refer to the illustration on page 59. Treadway Commission (COSO). According to COSO, the review and assessment are conducted in five areas where Information and communication. The internal policy instru- the control environment creates discipline and provides ments are available to all relevant employees on Trelleborg’s structure for the other four areas: risk assessment, intranet and are generally provided through training. control structures, information and communication, Special campaigns are conducted covering, for example, and monitoring. the Group’s whistleblower initiative. All relevant employees annually confirm in writing their knowledge of, and Control environment. The control environment provides the compliance with, the Group’s internal policy instruments. basis for the internal control. One important aspect is that The Group’s CFO and the Head of the Internal Control decision making, authority and responsibility are clearly staff function report the results of their work on internal defined and communicated between different levels within control as a standing item on the agenda of the Audit Trelleborg and that policy instruments, in the form of Committee’s meetings. The results of the Audit Committee’s policies, manuals and recommendations, exist (refer work in the form of observations, recommendations and to page 53 for a list of external and internal policy proposed decisions and measures are continuously instruments) and are observed. reported to the Board. The minutes of the Audit Committee The Board of Directors bears overall responsibility for meetings are presented to the Board and the Chairman of financial reporting where the Audit Committee assists the the Audit Committee reports on its work. Board by monitoring, for example, the efficiency of Trelle- External financial reporting is performed in accordance borg’s internal control, and risk management. with relevant external and internal policy instruments. The responsibility for maintaining an effective control environment and the day-to-day work involving internal Monitoring. Monitoring to ensure the effectiveness of control is delegated to the President. internal control is conducted by the Board, the Audit The Group’s Internal Control staff function serves as Committee, the President, Group Management, the the Group’s internal audit function and reports to the Audit Internal Control staff function, Group Finance, Group Committee and the Group’s CFO. The function focuses on Treasury and Group Tax as well as the Group’s companies developing, enhancing and securing internal control over and business areas. the Group’s financial reporting by proactively concentrating Monitoring includes the follow-up of monthly financial on the internal control environment and by examining the reports in relation to targets, quarterly reports with results effectiveness of internal control. from self-assessments in the Group’s companies and business areas, and results from internal . Monitoring Risk assessment. Risk assessment aims to identify and also encompasses following up observations reported by evaluate the most significant risks, including risk of fraud Trelleborg’s auditor. and risks in connection with significant changes, that affect The Internal Control staff function works in accordance internal control within the Group. with an annual plan that is approved by the Audit The assessment results in control targets that ensure Committee. The plan is based on the risk analysis and that the fundamental demands placed on external financial encompasses prioritized companies, business areas and reporting are fulfilled and comprise the basis for how risks processes within the Group, as well as work programs are to be managed through various control structures. and . The risk assessment is updated on an annual basis under the direction of the Internal Control staff function Activities in 2020. In 2020, the Internal Control staff and the results are reported to the Audit Committee. function conducted 30 internal controls in 13 countries, of

58 ANNUAL REPORT 2020 TRELLEBORG AB CORPORATE GOVERNANCE

which seven were IT security controls. The focus was staff function worked on a broad front with reviews of all primarily on Europe. The lower number of internal controls processes and most controls were conducted digitally. compared with earlier years was attributable to the pandemic. Most of the internal controls were conducted Activities in focus in 2021. The planned number of by the Internal Control staff function in cooperation internal controls will generally remain at the same level with internal resources from other staff functions with as in 2018 and 2019. Geographically, the Internal specialist competence in such areas as purchasing, Control staff function will primarily devote a greater focus finance and legal affairs, or jointly with controllers from to Asia and the US. In 2021, the Internal Control staff various business areas. Internal controls of IT security function will continue to work broadly with reviews of all were carried out by external IT consultants together with processes. A small number of internal controls are the Group IT staff function. In 2020, the Internal Control planned with the support of record analysis.

INTERNAL CONTROL STRUCTURE OF THE TRELLEBORG GROUP

Self-assessment Internal controls Training/Tools

Group-wide reporting system Internal controls are conducted Training programs in defined Financial reports and with quarterly feedbackfrom by the Internal Control staff processes relating to minimum reporting processes subsidiaries. function in cooperation with requirements for good internal internal resources from other control are carried out when

Companies respond to how staff functions and external necessary. Purchasing process they comply with the Group’s consultants. minimum requirements for good The purpose of the training internal control in selected Internal controls of IT security programs is to raise awareness process processes. are carried out by the head of and understanding of efficient Group IT together with external processes and good internal

Deficiencies are identified, consultants. control. measures are planned and Sales process implemented by the companies. Covers 7 selected processes Training programs are a forum and about 280 minimum for the exchange of experience Encompasses approximately and sharing best practice. Process for property, plant requirements for good 170 subsidiaries. internal control. and equipment Training programs in defined

Covers 7 selected processes Internal controls result in obser­ processes related to minimum and about 280 minimum vations, recommendations and requirements for good internal IT security process requirements for good proposals for decisions and control are also held as an inte- internal control. measures. grated part of the internal audits. Salary management All relevant employees annually Material available on the intranet process, incl. pensions and Identified deficiencies are confirm in writing their knowledge followed up on a quarterly basis to provide employees access other compensation of, and compliance with, the by business area controllers to standardized tools and Group’s internal policy and the Internal Control staff documents, as well as examples instruments. function. of business solutions.

THE FOLLOWING INFORMATION IS AVAILABLE AT WWW.TRELLEBORG.COM:

»»The Articles of Association »»The Code of Conduct »»Corporate Governance Reports from 2007 and onward »»Information regarding Trelleborg’s Annual General Meetings from 2004 and onward A summary of (notifications, minutes, President’s speeches, press releases) Trelleborg’s 115-year history can be found on »»Information regarding the Nomination Committee www.trelleborg.com. »»Information regarding the principles for remuneration of senior executives »»Information for the 2021 Annual General Meeting

ANNUAL REPORT 2020 TRELLEBORG AB 59