Operational Risks

The PNCC Quality Management System (QMS) through its ISO Core Team have identified the risks that need to be addressed to 1] give assurance that the QMS can achieve its intended results; 2] enhance desirable effects; 3] prevent or reduce undesired effects, and 4] achieve improvement.  The ISO Core Team together with Top Management hold a yearly planning session to address the actions to be undertaken on the identified risks. The identified risks on departmental level is summarized in the Risk Registry as required by the QMS in its Risks and Opportunities Management Procedure. Upon review of the ISO Core Team, the Risks Registry will be submitted to the President and CEO for approval and endorsement to the Board for adoption. The actions taken to address the risks had been integrated and implemented into the QMS processes.

The Corporation's principal financial instruments comprise of cash and cash equivalents, restructured debt and advances to and from related parties.  The main purpose of these financial instruments is to finance the Corporation's operations.  The Corporation has various other financial assets and liabilities such as receivables and vouchers payable and accrued expenses (excluding statutory payables), which arise directly from its operations.  The main risks arising from the Corporation's financial instruments are credit risk and liquidity risk.  The Corporation's Board of Directors (BOD) and Management review and approve the policies for managing each of this risk.

Risk Oversight

The Audit Committee's function already includes the assessment and management of enterprise risks.  As provided for in Section 16.3 of Code of Corporate Governance for the GOCC sector, it does not preclude the Governing Board of the GOCC from combining the functions of the committees into such combinations that will best serve the interest of the GOCC.

The Audit and Finance Committees is in charge of laying down and supervising the control mechanism:

Internal Control System

While policies are set by the Board, Management is primarily responsible for the implementation and maintenance of the internal control system of the company. The Board through its Audit Committee oversees the actions of Management and monitors the effectiveness of the Internal Control System put in place.  Recommendations are provided by Management and/or the Board, and in some cases by the External Auditor - Commission on Audit (COA) to address certain issues and concerns of the company.

The Board established an internal control audit system that can reasonably assure the Board, Management and stockholders that the company's key organizational and operational controls are faithfully complied with, effective and adequate.

Internal Audit

Role
Provides reliable and timely analysis, appraisals, recommendations and pertinent comments on the conformance / compliance of financial and business operations to established laws, norms, controls, rules and regulations to determine their integrity, effectivity and efficiency.

Scope
 Compliance with established prevailing government policies, plans, procedures, rules and regulation
 Corporate assets and other resources
  Reliability and integrity of the financial anf operating information

Reporting Process
Submits report to the Audit Committee for their review and recommends resolution

The appointment and/or removal of the Internal Auditor require the approval of the Audit Committee.

The Board has established and identified the reporting line of the Internal Auditor to enable him to properly fulfill his duties and responsibilities. He shall functionally report directly to the Audit Committee. The Audit Committee shall ensure that, in the performance of the work of the Internal Auditor, he shall be free from interference by outside parties.

Mechanisms and Safeguards

As a GOCC, the financial statements of the Company is statutorily mandated to be audited by Commission on Audit. The Company does not engage the service of Financial Analysts and Investment Banks. No restrictions on trading of the Company's shares in the Philippine Stock Exchange has been implemented because trading of shares has been suspended since May 2008.

The Chairman of the Board and President and CEO Miguel E. Umali are the officers who will have to attest to the Company's full compliance with the SEC Code of Corporate Governance.