247 Life Is On | Schneider Electric www.se.com Chapter 3 – How we manage risk at Schneider Electric Strategic Report 3. Senior Management Senior Management is responsible for designing and leading the overall internal control system, with support from all key participants, in particular the Group Internal Audit and Internal Control departments. It also monitors the Group’s performance during business reviews with the Operating Divisions and Global Functions. These reviews cover business trends, action plans, current results, and forecasts for the quarters ahead. Similar reviews are carried out at different levels of the Group prior to Senior Management’s review. Internal Audit The Internal Audit department reports to Senior Management. It had an average headcount of 18 auditors and 23 regional internal controllers in 2021. The internal auditors are responsible for ensuring that, at the level of each Business Unit: • the identification and control of risks is performed; • significant financial, management, and operating information is accurate and reliable; • compliance with laws and regulations and with the Group’s policies, standards, and procedures is ensured; • compliance with the instructions of the Chairman & CEO is ensured; • acquisition of resources is carried out at a competitive cost, and their protection is ensured; • expenses are properly engaged and monitored; • correct integration and control of acquisitions are ensured. Annual internal audit and internal control plans are drawn up based on a combination of a risk-based and audit universe coverage- based approach. The risk-based dimension is embedding risk and control concerns identified by Senior Management, taking into account the results of past audits, the results of Key Internal Control self-assessments returned by the Business Units, and other indicators such as the evolution of a set of financial metrics, the Corruption Perception Index, or the Employees Disengagement Index. When necessary, the audit plan is adjusted during the year to include special requests from Senior Management. After each internal audit, a report is issued setting out the auditors’ findings and recommendations for the Business Unit or Function audited. The management of audited entities or audited domains is requested to define for each recommendation an action plan aiming at implementing corrective actions. Measures are taken to monitor implementation of the recommendations and specific follow up audits are conducted if necessary. Audit reports and the implementation of their recommendations are distributed to Senior Management. An executive summary is sent to the Chairperson of the Audit Committee as well as to the top management. A synthesis of the main takeaways and conclusions from a selected number of audit missions is presented to the Audit Committee for each committee session (five times per year). These reports are subject to regular exchange with the Group’s auditors. The Head of Internal Audit has direct access to the Chairperson of the Audit Committee and meets her on a regular basis throughout the year. Internal Control department The Internal Control department, which reports to the Reporting and Consolidation unit, is responsible for, in particular: • defining and updating the list of Key Internal Controls in close co-operation with the Global Functions and other subject matter experts in line with the recommendations of the French Financial Market Authorities (AMF) reference framework; • maintaining and leading a network of around 14 local internal controllers who are responsible for supporting local management on internal control topics and acting as process owners for certain key areas such as the chart of authority and segregation of duties; and • organizing and monitoring the roll-out of self-assessment campaigns and implementation of set action plans following self-assessments. The team continues to improve the internal control process and adapt its procedures following the results of self-assessments and changes in the business environment or organization. Global Finance department The Global Finance department is actively involved in organizing control and ensuring compliance with financial procedures. Within the department, the Reporting and Consolidation unit plays a key role in the internal control system by: • drafting and updating instructions designed to ensure that statutory and management accounting practices are consistent throughout the Group and compliant with applicable regulations; • organizing period-end closing procedures; • analyzing performance and tracking the achievement of targets assigned to the Operating Divisions and Business Units. The Reporting and Consolidation unit is responsible for: • the proper application of Group accounting principles and policies; • the integrity of the consolidation system database; • the quality of accounting and financial processes and data; • training for finance staff by developing and leading specific seminars on the function; and • drafting, updating, and distributing the necessary documents for producing quality information. The Reporting and Consolidation unit drafts and updates: • a glossary of terms used by the Reporting and Consolidation unit, including a definition of each term; • the chart of accounts for reporting; • a Group statutory and management accounting standards manual, which includes details of debit/credit pairings; • a Group reporting procedures manual and a system user’s guide; • a manual describing the procedures to be followed to integrate newly acquired businesses in the Group reporting process; • an intercompany reconciliation procedures manual; and • account closing schedules and instructions. The Reporting and Consolidation unit monitors the reliability of data from subsidiaries and conducts monthly reviews of the various Business Units’ primary operations and performance.