Vector Annual Report 2019

Vector AR’19 ― governance report (continued)

Internal audit Vector’s Group Internal Audit function provides independent and objective assurance on the effectiveness of governance, risk management and internal controls across all business operations. The team follows a co- sourced model, drawing on both in- house and external expertise, and has unrestricted access to all Vector staff, records and third parties. The team liaises closely with KPMG, as Vector’s external auditor, to share the outcomes of the internal audit programme to the extent that they are relevant to the financial statements. Ethical and responsible behaviour The Code of Conduct and Ethics outlines the responsibilities of Vector’s people and explains the standards of conduct and ethics. At Vector our vision and values are the foundation of our business; they reflect who we are and how we do business. Together as a team, as well as with our customers, partners and the wider community, each and every one of us

has an important role to play in bringing our values to life. The purpose of our Code is to provide a framework for ethical decision making. However, the Code is not a substitute for good judgment. As Vector employees we strive to carry out our work in accordance with our values, and this Code should be used as a practical set of guiding principles to help us make decisions in our daily jobs. Diversity and inclusion The Board’s commitment to creating and maintaining both a diverse workforce and an inclusive workplace for all employees is reflected in its Diversity and Inclusion Policy. A Diversity Council, made up of senior management representatives, provides governance over the implementation of the Policy. The Diversity Council also provides guidance and direction in relation to the activity of the Diversity Committee, which consists of employee representatives from across the business. Vector has sought to establish measurable objectives for achieving

diversity, including gender diversity, and its annual assessment of its diversity objectives for FY19 and the company’s progress towards achieving these objectives are set out on pages 32 to 33 of this annual report. Investor engagement Vector’s Board is committed to maintaining open and transparent communications with investors and other stakeholders and it supports a programme for two-way engagement with shareholders, debt investors, the media and the broader investment community. Annual and interim reports, NZX releases, quarterly reports on operational performance, governance policies and charters and a wide variety of corporate information are posted on Vector’s website. Vector conducts detailed market briefings in conjunction with the release of the annual and interim financial results. Transcripts of the briefings are available at the annual reports page of the Investor section of the website.

Introducing the Audit-Bot The core purpose of the internal audit function is to add value and improve the operations of the organisation. However, the exponential pace of change in today’s business environment means that the traditional assurance model is unable to meet the shifting needs of our stakeholders and is ill-equipped to address emerging risks. At Vector, we have recognised the role that emerging technologies and innovation will play in the future of internal audit. Over the course of the year, the internal audit function has been automating controls testing and exception reporting using data analytics and robotic automation with cognitive intelligence technologies. This has enabled a move frommanual, point in time sample based testing towards an automated and continuous assurance model that is able to analyse the whole data population. For example the audit-bot can now review all business expenditure and identify those that may have been approved outside of delegated authority levels and require further investigation. Using cognitive technologies, the audit-bot’s capability has also been extended to look at external risk factors such as reputation through tracking of social networking and online news media. This supplements existing external controls by Vector supporting early detection via continuous monitoring. This innovation delivered by the audit-bot has also been transformational in enabling greater assurance across the business, increased operational efficiency, extended audit coverage, improved effectiveness of controls and continuous monitoring of controls. Over the coming year internal audit will continue to bolster its armoury with more emerging and disruptive technologies, such as artificial intelligence and machine learning. This will improve our ability to anticipate and efficiently respond to stakeholder needs, address the challenge of emerging risks, improve operations and assist in safeguarding the business as management pursues new methods of creating and delivering value.

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