Risk management :-

The goal of risk management is to secure the Group's earnings

development and to ensure that the company operates without any
disturbances by controlling risks in a cost efficient and systematic
manner in all [Link] Board of Directors has approved the
company's risk management principles, which concern all of
the Stockmann Group's divisions and areas of business.

Stockmann's Board of Directors and the Group Management Team

regularly evaluate risk factors to which business operations are
exposed and the sufficiency of risk management actions as a part of
the strategy process. Risk management is supported by internal control
systems and guidelines. Risk management guidelines have been drawn
up separately for the following areas, among others: IT and
information security, finance operations, environmental issues,
malpractice, security and insurance.

Stockmann's business is exposed to various risks that may have an

adverse effect on the company's operations. The
divisions' management committees are responsible for making
financial and strategic plans in their own units; analysing business
risks and evaluating actions is a part of strategy planning. Business
risks are also analysed outside the strategic process, especially
in connection with significant projects and investments, and are
reported to the Board of Directors as needed.

The Group has a risk management steering group, whose task it is to

support business operations in recognising and managing such risks
that may endanger or prevent Stockmann from achieving its strategic
goals. The steering group, which comprises the company's Head of
Internal Audit, Director of Legal Affairs and Group Consolidation
Manager, reports its ndings and recommendations to the Group's
Management Team.

Main features of the internal control and risk management systems

pertaining to the nancial reporting process:-
 The company's Board of Directors is responsible for the
implementation of internal control in regard to nancial reporting and
attends also to the duties of the Audit Committee. The Group's Chief
Financial Officer and the Finance and Control Department are
responsible for the Group's financial reporting. Group-level directions
are complied with in Stockmann's nancial reporting.

The reporting is based on information from commercial and

administrative processes and data produced by the nancial
management systems.

The Group's Finance and Control Department determines the control

measures applied to the nancial reporting process. These control
measures include various guidelines, process descriptions,
reconciliations, and analyses used for ensuring the validity of the
information used in the reporting and the validity of the reporting
itself.

The nancial reporting results are monitored and any anomalies in

relation to forecasts or in comparison with the previous year's gures
are analysed on a regular basis. Such analyses are used to detect any
reporting errors and to produce materially accurate information on the
company's nances.

The divisions and the Group's Finance and Control Department are
responsible for the effectiveness of internal control within their own
sphere of responsibility.

The Group's Finance and Control Department is responsible for

assessments of the reporting processes. The risk management process
includes assessment of the risks pertaining to financial reporting and
the related management measures are determined as a part of the risk
management process.
The Relationship Between Internal Audit and Internal Control :-

The best way to illustrate the relationship between Internal Audit and Internal
Control is to show where they both fit in the Three Lines of Defense Model.
Heres an image of the model from The Institute of Internal Auditors:

Internal Control is part of the first line of defense because it is the responsibility
of Operational Management, which itself is accountable to Senior
Management. Internal Audit is part of the third line of defense. It even assesses
the effectiveness of the first (Operational Management functions) and second
(Risk and Compliance Management functions) lines of defense. Moreover,
unlike Internal Control, Internal Audit may report directly to the Board of
Directors and specifically the Audit Committee, in order to maintain a certain
independence and objectivity when assessing other functions in the company
that operate at the first two lines of defense.
Finally, if you are considering software solutions for Risk Management,
knowing the difference between Internal Audit and Internal Control becomes
even more important, because both must be managed in different ways due to
their unique characteristics. Make sure that the software under consideration
addresses the unique needs of both.

The 2G Spectrum Scam Story

How did it start?

On November, 2008, Subramanian Swamy wrote to Prime Minister

Manmohan Singh and followed it up with four more letters seeking
sanction to prosecute A. Raja in regards to 2G telecom spectrum political
corruption scam.

When the Prime Minister Manmohan Singh didn't take any decision
Swamy went to Supreme Court. On 27 November 2010 Subramanian
Swamy anounced that he will file a criminal case against former union
minister

Raja in the 2G Spectrum Scam before the Special Court for Corruption
Cases in connection with the charges of irregularities in 2G spectrum
allocation
What Happened?

2G licenses issued to private telecom players at throwaway prices in 2008

CAG: Spectrum scam has cost the government Rs. 1.76 lakh crore

CAG: Rules and procedures flouted while issuing licenses.

Person accused is the Telecom minister : [Link]

The Comptroller and Auditor General of India (CAG) said it has submitted
to the government the report on the 2G spectrum allotment that is presumed to
have caused a revenue loss of up to Rs. 1.76 lakh crore

CAG Report

CAG has accused the telecom ministry for undervaluing 2G spectrum,

sold to new players in 2008, and held that the allotment price was not
realistic, which has caused a revenue loss of up to Rs. 176,700 crore to
the government.
 The report is also believed to have castigated telecom minister A Raja for
ignoring the advice of finance and law ministries on allocation of 2G
spectrum to benefit a few operators.

It is also believed to have criticised telecom regulator TRAI standing as a

helpless spectator when its recommendations were being ignored or
misused.

The CAG report said the price at which the spectrum was alloted in 2008
was based on 2001 prices, which was quite low and has resulted in a loss
to the government exchequer.

Also, no proper auction method was followed and no bids were taken to
sell out the spectrum.

Who All Benefited from This Scam ?

2G spectrum was allocated beyond contracted quantity to 9 firms including

Bharti, Vodafone, Idea, BSNL, Reliance, Aircel," the report [Link] Radia is
said to be [Link] her details.

Department of Telecommunications (DoT) circumvented the rules to help Swan

Telecom, which effectively acted as a front for Reliance Telecommunications.
The charges in the CAG report are that Swan should not have been considered
for a license because Reliance Communications held 10.7% stake in Swan - and
according to the rules, a telecom operator cannot own more than 10% stake in
another telecom company operating in the same service area.

"Email ID of Swan Telecom was shown as that of a Reliance ADA group

official

Another big beneficiary of the 2G spectrum allocation was Unitech

Wireless, which had no experience in the telecommunication sector.
After Unitech got the license for a throwaway price of Rs. 1,661 crore,
it sold 60 per cent stake to Telenor Asia for a whopping Rs. 6,200
crore.

Politicians involved

A. Raja, the Ex-Minister of Communications and Information Technology

who was the minister when the controversial second round of spectrum
allocations took place.

Arun Shourie, the minister for Telecom during 2003 in the previous BJP
regime.

Pramod Mahajan, the minister for Telecom between 1999 and 2003.

Bureaucrats involved
 Siddhartha Behura, former telecom secretary who served in the DOT at
the time of the 2G allocation.

Pradip Baijal, a bureaucrat who is alleged to have implemented policies

that favored certain Telecom companies when he was heading the TRAI.

R K Chandolia, private secretary of Raja during UPA-I when the licences

were awarded. He was an Indian Economic Service officer of the 1984
batch cadre.

Corporations involved

Unitech Group a real estate company entering the telecom industry with
its 2G bid; sold 60% of its company stake at huge profit to Telenor after
buying licensing (Including land values properties for towers)

Swan Telecom sold 45% of its company stake at huge profit to Emirates
Telecommunications Corporation (Etisalat) after buying licensing

Loop Mobile

Videocon Telecommunications Limited

S Tel

Reliance Communications

Sistema Shyam Mobile (MTS) Sistema Mobile Russia

Tata Communications

Vodafone Essar

Dishnet Wireless

Allianz Infra

Media persons and lobbyists involved

 Nira Radia, a former airline entrepreneur turned corporate lobbyist
whose conversations with politicians and corporate entities were
recorded by the government authorities and leaked creating the Nira
Radia tapes controversy.
Barkha Dutt, an NDTV journalist alleged to have lobbied for A. Raja's
appointment as minister.
Vir Sanghvi, a Hindustan Times editor alleged to have edited articles
to reduce blame in the Nira Radia tapes.

Petitioners

Subramaniam Swamy, activist lawyer and politician, whose letters to the

Prime Minister demanding action and affidavits and cases in the Supreme
Court brought the issue into the public limelight.

Paranjoy Guha Thakurta, a journalist who was one among the very first to
write on the irregularities in the awarding of 2G spectrum allocation by
the Telecom Ministry. He is also one of the petitioners in the 2G PIL
currently being heard in the Supreme court.

Prashant Bhushan, on behalf of the Centre for Public Interest Litigation.

Anil Kumar, on behalf of the civil society organisationTelecom Watchdog

Others:Several eminent people like former chief election commissioners

J.M. Lyngdoh, T.S. Krishnamurthy and N. Gopalaswami and former
central vigilance commissioner (CVC) P. Shankar are also petitioners in
the suits filed by civil society groups

What happened after the Scam?

The stand-off between the government and the Opposition over 2G scam
continues. The Opposition wants a Joint Parliamentary Committee (JPC)
to investigate the 2G scam.
 Parliament has not functioned at all this winter session - the Opposition
says it won't let the House get to work till a JPC is announced.

Response to the Scam

In early November 2010 Jayalalithaa accused the Tamil Nadu state chief
minister M Karunanidhi of protecting A. Raja from corruption charges
and called for A. Raja's resignation. By mid November A. Raja resigned.

In mid November the comptroller Vinod Rai issued show-cause notices to

Unitech, S Tel, Loop Mobile, Datacom (Videocon), and Etisalat to
respond to his assertion that all of the 85 licenses granted to these
companies did not have the up-front capital required at the time of the
application and were in other ways illegal.

Some media sources have speculated that these companies will receive
large fines but not have their licenses revoked, as they are currently
providing some consumer service.

In response to the various allegations , the Govt of India has replaced the
then incumbent Telecom minister ,A Raja with Kapil Sibal who has taken
up this charge in addition to being the Union minister for Human
Resources Development.

Mr Sibal contends that the "notional" losses quoted are a result of

erroneous calculations and insists that the actual losses are nil.

The CBI conducted raids on Raja and four other telecom officials -
former telecom secretary Siddharth Behura, Raja's personal secretary R K
Chandolia, member telecom K Sridhar and DoT deputy director general A
K Srivastava on 8 December 2010.

Raja, Behura and Chandolia were arrested on Feb 2nd 2011.

Niira Radia also seems to be involved in big way with the 2G spectrum
scam.
 DMK party chief Karunanithi also accused of being involved in scam by
Swamy.

Online community makes fun of the Scam

.
This, is News BY MANOJ KEWALRAMANI:-

This, he said with a determined look, before pausing for a moment. Is news,
he
continued, as the screen faded into darkness.
Thats as honest as one can be these days, I thought, with the image of Ryan
Seacrest
hosting E! News still in my head.
Perhaps its a reflection of just how cynical I have become or perhaps its just a
measure
of how the trade has evolved.
Yes its a trade; its always been one. All it has done is metamorphosed from the
practice
of a skill to the far more realistic you-scratch-my-back-and-I-scratch-yours
stage.
Nah, thats a dirty phrase. It just trivializes the effort that goes into sustaining
the
mystique of morality while manufacturing opinion.
Its an art; it always was and still is. Its an art to howl aloud clichs like your
views
your call your channel your paper and pretend to be your conscience
while
still selling you a product that you dont even know you are consuming.
Truly, it is an art, an art that perhaps those in PR circles would describe as
environment
management. And with the way we live today, the degradation of the
environment
with each passing day should hardly come as a surprise to us.
No money, no news, is how noted journalist P Sainath described the scenario
during
the Maharashtra elections last year.
Painting a grim picture, he added: The game has moved from the petty
personal corruption
of a handful of journalists to the structured extraction of huge sums of money
by media outfits.
But thats just the tip of the iceberg an iceberg that perhaps began melting
publicly
when the cash-for-votes scam hit Parliament.
As journo after journo and channel after channel debated the new low that the
legisla2G
Spectrum Scam 01/09/11 8:01 AM
[Link] Page 2 of 3
ture had sunk to, there was hardly any discussion about the behind the scenes
tapes
and recordings that seemed to exist but didnt see the light of day.
Political favour you presume? Well most certainly. But a better answer can
perhaps
be found in the convoluted books of accounts and the equity structure or even
something
as simple and transparent as the advertising contracts.
Still not convinced, youd probably scoff and parrot the old adage of everybody
needing
to run a business one way or the other. Whats more, being a little stingy with
the
truth is a bargain that maybe you can live with.
Fair enough, perhaps we can; and perhaps sometimes its better for the health of
a
crumbling edifice, that is our system and our faith in it, to not let the hammer
strike it
with full force.
But then, thats acceptable if only the rot had decided to limit itself till where it
was.
In reality though, the spectrum (pun intended) it covers is far wider and far
deeper.
While the Telecom Minister may hang on to his chair, courtesy the limitations
of
coalition politics or rather the dire need of those who want him there, the real
question
is how did he, with a murky track-record, get the job in the first place?
By now, of course we are all familiar with the tale. Boys meets girl. Boys hire
girl. Girl
pushes their agenda through a complex mix of favours and persuasion. A few
hiccups
later, the Raja is seated on the much-vaunted throne. Its just poetic justice how
the story of the great Telecom battle of 2009 was narrated through taped
conversations.
Its a familiar script, but the devil lies in the minor details. In that story, this may
have
been a miniscule sub-plot, but in the larger scheme of affairs, it is anything but a
small deal when noted journalists get named in confidential reports for lobbying
to
get the right man in the right place.
And thats just how the system works. You cover not at the behest of public
good,
freedom, accountability and maintaining a check on the way things are. You
cover as
per the requirements of your balance sheet, or at least the ones who are keeping
it
balanced.
Thats what it generally means when the bold Exclusive flashes on your
screen.
Theres a price to be paid for such exclusivity. In our world today, that price is
ethics
and independence.
The last time I somberly told a journalist friend of mine about this fact, he
turned to
me cherry-faced, accusing me of pedaling sanctimonious bullshit that doesnt
survive
the test of reality.
I didnt have an answer then, but I do today. Read through the article again and
then
tell me who it is thats being real and who it is that bellows holier than thou crap
like
trust, honesty, credibility, truth, 247.

CAG report on 2G scam:-

The Supreme Court of India has rapped the premier

investigating agency, Central Bureau
of Investigation (CBI), for conducting a slipshod investigation
into the 2G Spectrum
Scam. The Apex court took the CBI to task by stating that the
agency was dragging
its feet in the investigation.
The SC is hearing two petitions in the matter. The first was
filed by an NGO, Centre
for Public Interest Litigation (CPIL), and the second filed by
Janata Party chief Subramanian
Swamy. Swamy had challenged the Delhi High Court order
that rejected his
plea to direct the PM to grant sanction to prosecute Telecom
Minister A Raja.
CPIL has placed before the Supreme Court two draft reports
of the Comptroller and
Auditor General (CAG), which pointed out that the 2G scam
has caused a loss of over
1 lakh crore to the exchequer. [Link] brings you some
important extracts of the
CAG draft reports, which directly points a finger of suspicion
towards Raja for alleged
irregularities and favoritism in the allotment of spectrum.
Despite all agencies having full knowledge of scarcity and
under pricing of spectrum,
the entry fee for issue of licenses continued to be pegged at
2001 rates even
in 2007 without delinking and independently pricing
spectrum through a market
mechanism, when the entire scenario in the telecom sector
had transformed
in the meanwhile.
Ignoring the advice of the Prime Minister, and the Law
Ministry, Raja went
ahead with arbitrarily deciding that the cut-off date for issue
of LoI would be advanced
to September 25, 2007 and the applications received would
be decided
on first-come-first-serve (FCFS) basis.
The CAG report states that it was amply demonstrated
between September
2007 and December 2008 that its (spectrum) demand in view
of its scarcity was
at its peak and thus would have fetched the market
determined price at a much
higher level than that of 2001 entry fee. If price is calculated
at 3G rates, which
also be taken as one of the indicators for assessing the value
of 2G spectrum allocated
to UAS licensees in 2008, the value works out to Rs 111,511
crore against
Rs 9,012 crore realised by DoT. Similarly, for spectrum
allocated under the dual
technology as referred in earlier para the value would have
been Rs 40,526 crore,
as against Rs 3,372 crore collected. The total difference in
value worked out to Rs
139,652 crore.
It was evident that at the time of applying for UAS licence the
substantial equity
of M/s Reliance Telecom Ltd in M/s Swan was 10.7%. Since
M/s Reliance Telecom
Ltd. were operating in all the service area for which M/s.
Swan Telecom
Ltd. has applied for USAL, their application was not in
conformity with clause 8
of UASL Guidelines, and hence was not eligible to be
considered. DoT did not
have any mechanism to verify the correctness of the
shareholders pattern of the
applicant and hence the matter should have been referred to
the Department of
Company Affairs as was advised by the Finance Wing of the
Department. No
Reference, however, was made to the Department of
Company Affairs and
instead M/s Swan Telecom was given an opportunity to
resubmit a revised
stake holding pattern in December 2007 i.e. 9 months from
their date of application
which declared that M/s Reliance Telecom had divested their
entire stakes.
This was accepted by DoT and M/s Swan Telecom was given
the benefit of seniority
form the date of their initial application i.e. March 2007. As
M/s Swan
did not meet the eligibility criteria on the date of application,
its application, its
application should have been rejected by the department and
the company
should have been asked to apply afresh. Even if it is was to
be considered eligible
on the basis of its old application, the date of priority based
on FCFS basis
should have been revised from March 2007 to December
2007 in order to ensure
fairness. Had it been so, the company would have been out
of the race as the department
processed only those applications which were received up to
25.09.2007.
It was noted that the priority list was adjusted in Punjab and
Maharasthra service
areas to give under advantage to M/s Swan Telecom Pvt. Ltd.
in allocation
of spectrum. In Punjab service area, 15 MHz GSM spectrum
was available in
September 2008 which was sufficient to meet the demand of
only first three
applicants in the priority list i.e. M/s HFCL, Idea Cellular Ltd.
and Unitech
Wireless Pvt. Ltd. The request of M/s Idea Cellular Ltd. who
was at the second
place in the priority list was, however, not considered on the
grounds of its
merger with M/s Spice who were offering service in Punjab
service area. By
keeping out M/s Idea from the priority list, spectrum was
allocated to M/s
Swan Telecom who was at the 4th position on the priority list.
In identical situation in Maharashtra service area, M/s Spice
Communications was not allocated
start-up spectrum citing its merger with M/s Idea Cellular Ltd.
Here too, the resulting
beneficiary was M/s Swan Telecom Pvt. Ltd.
Deviation from a Cabinet decision should normally be with
the approval of Cabinet.
However, in the present case, such a crucial decision to
permit service
providers to offer access services using combination of
technologies (CDMA,
GSM and/or any other) under the same license with the dual
spectrum allocation
was taken without the matter being referred to Cabinet.
DoT has given a list of operators who could attract foreign
investments, consequent
to the grant of UAS licenses in January 2008 as in the Table
below (Table
not included in the post). Out of the above six, three
companies viz M/s Swan
Telecom, M/s S Tel and M/s Unitech were new entrants in the
telecom sector.
The fact that these operators could draw huge foreign
investment, even before
establishing a foothold in the Indian Telecom market would
suggest that acquiring
UASL and with it, allotment of 4.4 of GSM spectrum for
rollout, was the
main factor which attracted the foreign investment.
The Unitech Wireless Services, claimed in their letter to DoT
on November 4,
2008 that M/s Telenor was partnering with them at a stage
when about 6
months of effort and Rs 2,100 crore expenses had already
been put in and the entitys
value was not only that of spectrum. However, considering
that Telenor is
an established international provider of a high quality
telecommunications, data
and media communication services and one of the Norways
largest companies
owned 54% by the Norway Government what they would
have required to run
their business in this country was, primarily access to the
spectrum. Considering
its trained manpower strength in 12 countries, its long
standing technical expertise
and international experience of dealing in telecom business,
it can be convincingly
concluded that, the high value paid by them was primarily for
the
spectrum and not for other inputs claimed to have been
infused by Unitech.
Such huge equity infusion by the investor company was a
price that they paid
for 2G spectrum which was allocated to Unitech, a company
with no experience
in telecommunication sector, at a throw away price DoT. The
value which
should have accrued to the new licensees in the form of huge
capital infusion for
enriching their business.
The entire process of spectrum allocation was undertaken in
an arbitrary man
ner. The Honble prime Minister had stressed on the need for
a fair and transparent
allocation of spectrum, and the Ministry of Finance, and the
Ministry of
Law and Justice had sought for the decision regarding
spectrum pricing to be
considered by an EGoM. Brushing aside these concerns and
advices, the Development
of Telecommunications, in 2008, proceeded to issue 122 new
licenses for
2G spectrum at 2001 prices, thus flouting all rules and
procedures to be followed
for spectrum allocation was also unfair, considering the fact
that DoT introduced
in artificial cap, arbitrarily changed the cut-off-date for
receipt of applications
post facto and altered the conditions of the FCFS procedure it
had been following,
thus creating an environment which cannot be perceived as
transparent and
fair.
Dual Technology was introduced by DoT in a manner, which
was in contravention
of the Cabinet decision of 2003, resulting in additional
spectrum being allotted
to certain operators at 2001 price. Also by introducing unfair
adjustments in
the priority list, DoT favoured certain operators. Given its
scarcity value and increasing
demand, a comprehensive evaluation of available spectrum
was required
which was not done. With the UAS policy and its subsequent
amendments
being implemented in a weak and indeterminate manner and
with the reluctance
on the part of DoT to address the issue of pricing of 2G
spectrum, it was
only natural that 2G spectrum was allocated at much below
its value.
The Honble MoC&IT for no apparent logical or valid reasons
ignored the advise
of Ministry of Law, and Ministry of Finance, avoided the
deliberations of
the telecom Commission to allocate 2G spectrum, a scarce
finite national asset at
less than its true values on flexible criteria and procedures
adopted to benefit a
new operators. TRAI, the regulator also stood by as a helpless
spectator when its
recommendations were being either ignored or misused.
The CAG draft report also mentions a note (Dated: January
15, 2008) sent to the PM
by the Finance Ministry, which says that the previous issues
of licences be treated as
a closed chapter and henceforth price of spectrum be
discovered through an auction
process. This reveals the casual approach within the UPA
Government towards this
mega-scam, which resulted in a loss of Rs 139,652 crore to
the exchequer.
Despite mounting evidence (from CVC, CAG, CBI) of blatant
corruption A Raja still
presides over the Telecom Ministry. While Prime Minister
Manmohan Singh heading one of the most corrupt
governments in our country post-Independence seem
helpless in taking action against Raja because of the electoral
considerations for the
assembly polls in Tamil Nadu due to take place in 2011.

PM speaks on 2G Scam
Prime Minister Manmohan Singh finally broke his silence and
met with editors of
five newspapers.
While discussing a range of issues and answering questions
the PM also spoke about
various corruption scandals (including 2G Scam), admitting
that he may have been
soft.
Question: Do you think you should have dealt with your
coalition partners more
firmly in your earlier term?
Answer: I really dont know which is the golden mean? I
dont know if some of these
things could have been avoided. Because some of these
things which have happened,
they have happened without our getting the full picture. Take
the case of 2G auction.
I had myself written to Raja, that we should consider auction.
He wrote back saying
this matter was considered by TRAI. TRAI came to the
conclusion which was endorsed
by Telecom Commission this is on record and it is a public
property you
also have access to it. He said to me TRAI is against
auction. TRAI is also against
other verification which would help the competition between
the new and the old.
Quite frankly, I felt TRAI exists to advise the government, it is
an expert body. And
therefore, I left it at that. On the same matter, three letters
that he wrote to me, he assured
me that utmost transparency, fairness and objectivity will be
observed in anything
that he has done or will do. When a cabinet colleague makes
that sort of an assurance,
I cannot sit in judgement. After that someone approached the
CVC. The
CVC then passed it on to the CBI. The CBI began
investigating. They raided the offices
of the ministry.
Question: One of the biggest assets you had was your
integrity and honesty. But in
the second term, while your personal integrity remains above
board, there is an impression
that you allowed these things to happen.
Answer: If a Cabinet colleague tells me, that in all matters of
his ministry, he will
scrupulously work by the norms of ethics, fairness and
transparency. How can I conduct
a post-mortem? I am not an expert in telecom matters. As
Prime Minister, it is
not that I am very knowledgeable about these matters. Or
that I can spend so much of
my time, to look after each and every ministry. Ministers
administer their departments,
and if they dont apply any policy change, they are free to
implement the policy
to the best of their ability. One observation that my private
secretary recorded, that
the Prime Minister says there must be transparency the
minister should have said it
was his responsibility rather than saying that the Prime
Minister has also endorsed
it.

BIBLIOGRAPHY:

Websites:
[Link]

[Link]
all-about/1/[Link]

[Link]

[Link]