10. INTERNAL CONTROL

Bumrungrad Hospital Public Company Limited continuously values the
internal control system and the internal audit system, and well realizes
that the good internal control and audit systems can prevent potential
losses, detect existing errors, mitigate business risk and operational
risk to the acceptable level, generate accurate and reliable financial
reports, and help the Company achieve its goals. As a result, the Board
of Directors has governed and assigned the Audit Committee to review and
comment on effectiveness of the Company’s internal control system, which
can be divided into 5 main parts as follows:

Part 1: Organizational Control and Environment Measure

The Company set its vision, mission, and operating policy, with the
emphasis on integrity and ethics, and clearly defined both short-term
and long-term business goals. It has also rewarded employees based on
their performance on achieving those goals. In addition, the Company has
the organizational structure and work procedures that help tighten its
operations and prevent unauthorized asset use. Furthermore, the
Company’s executives continuously develop and improve the quality of
management; resulting in recognitions by several third-party
organizations, as evidenced by various awards, such as “Best Managed
Company in Thailand - Small Cap 2008” by Asiamoney Magazine, “Total
Quality Class Award 2008” by the Office of Thailand Quality Award, and
“National Best Practices Award on Labor Relations and Labor Welfare
Award 2009 and 2010” by the Ministry of Labor. Based upon the
aforementioned characteristics, it is deemed that the Company has a good
organizational structure and environment, which is an essential
foundation for an effective internal control system.

Part 2: Risk Management Measure

The Company regularly assesses business risk factors, taking into
account economic, political, social and environmental circumstances,
including the industry situation and competition, which are external
factors. It also assesses internal factors, especially risk factors
concerning medical services, which may have a significant impact to the
Company. In addition, the Company has established the risk management
policy and assigned the management to continually monitor incidents that
cause the risk factors. It has also defined the Hospital Risk Management
Process and the Safety and Environment Risk Assessment as part of the
Hospital Administrative Policy (HAP). Consequently, it is deemed that
the Company has the effective risk management process that can mitigate
business risks to the acceptable level.

Part 3: Management Control Activities

The Company has established transaction approval authority and limits
based on the nature and amount of transaction. In case of connected
transactions or potential conflict of interest transactions, the Audit
Committee has a duty to review the necessity and rationale of those
transactions, which must be approved by the Management, the Board of
Directors, or the Shareholders as the case may be. The person with
conflict of interest is not allowed to vote in these transactions.
Moreover, the Company regularly monitors subsidiaries’ and affiliates’
operations by delegating the Company’s directors to take a position of
chairperson, directors, or executive directors in those subsidiaries or
affiliates. In 2010, the Company entered into all such transactions with
related persons or parties in compliance with the principles,
procedures, and conditions stipulated in laws and regulations, under the
good corporate governance policy, on an arm’s length basis, and for its
own highest benefits.

Part 4: Information and Communication Measure

The Company has performed financial reporting in accordance with the
accounting policy as deemed appropriate for its nature of business, and
with the Generally Accepted Accounting Principles (GAAP). In addition,
the Company is in the process of preparing for the implementation of the
International Financial Reporting Standards (IFRS), which will be
effective in the year 2011, by establishing working groups consisting of
relevant persons from different departments and assigning them to
prepare data and information systems to be ready for those standards.
The Company has also engaged a consulting firm to give advice and
provide training sessions for all relevant executives and employees.
Moreover, the Company has provided necessary and sufficient information
for the Board of Directors to make a decision.

Part 5: Monitoring

The Company set up the Internal Audit Division, which directly reports
to the Audit Committee, to ensure its independence. Its duty is to audit
the internal control system, the risk management process, and corporate
governance. The audit objectives are to assure that:

-   Operations in various processes are efficient and effective enough
    to achieve the Company’s objectives;

-   The financial reporting process has adequate and proper controls to
    make financial data reliable;

-   The management control process is effective enough to govern
    adherence to laws and regulations, and the Company’s policies and
    procedures;

-   The internal controls over work processes pertaining to patients’
    safety are effective and adequate.

In addition, the Company delegated the internal auditors to conduct a business process review for its subsidiaries or associates, and assigned responsible persons to determine ways to develop and improve work systems according to the internal auditors’ recommendations, and the independent auditor’s recommendations in the Management Letter.

As a result of the assessment of the adequacy and appropriateness of the internal controls based on the above five components, the Board of Directors has the opinion that the Company’s internal control system is adequate and effective, and there were no significant deficiencies in the internal control system. 

Report of the Audit Committee

To the Shareholders of Bumrungrad Hospital Public Company Limited

The Board of Directors appointed the Audit Committee, consisting
entirely of three independent directors of the Board. Miss Sophavadee
Uttamobol was appointed as Chairperson with Mr. Boonpakorn Chokwathana
and Mr. Soradis Vinyaratn as members, and Mrs. Tawichar Tansathit as a
secretary to the Committee. Its main duties and responsibilities are to
review financial reports, internal audit and control systems, risk
management systems, and the compliance with laws, and to consider
potential conflict of interest transactions.

In the year 2010, the Audit Committee held totally 4 meetings, all of
which were attended by all members, to perform its duties and
responsibilities, including the following major issues:

1.  Reviewed the Company and its subsidiaries’ financial statements
    prior to submission to the Board of Directors. Based on due
    consideration, after discussions with the executives, a
    non-management meeting with the Company’s independent auditor, and
    consideration of the auditor’s recommendations in the Management
    Letter, the Committee has the opinion that the above financial
    statements are prepared accurately, completely, and creditably.

1.  Reviewed and assessed the internal control systems. The Committee
    has the opinion that the Company has appropriate, effective, and
    adequate systems, sufficient to mitigate its risks to the acceptable
    level, and help the Company achieve its operation goals.

2.  Reviewed the compliance with laws and regulations relating to the
    Company’s business operations. The Committee has the opinion that
    the Company has no legal violation that may significantly affect the
    Company’s reputation and financial status.

3.  Considered, selected, and nominated the Company’s independent
    auditor, which is Ms. Vissuta Jariyathanakorn from Ernst and Young
    Office Limited, and proposed her remuneration to the Board.

4.  Considered connected transactions or potential conflict of interest
    transactions. The Committee has the opinion that all such
    transactions were the Company’s normal business transactions.

5.  Considered and approved the internal audit plan, which were
    determined to be suitable for the Company’s nature of business,
    including its administrative policies, business plans, work
    processes, and business risks.

6.  Considered and approved the internal audit division’s yearly
    expenditure budget and manpower requirements, which the Committee
    approved of recruiting additional two employees for the year 2011 to
    support the Company’s business expansion.

7.  Promoted continuing education for all members of the Audit Committee
    by attending professional seminars including the courses for the
    International Financial Reporting Standards (IFRS), which will be
    effective in the year 2011, in order to obtain sufficient knowledge
    to review the reliability of financial statements.

9. Considered and performed the Audit Committee’s self-assessment to
present to the Board of Directors. The Committee has the opinion that it
has appropriately performed its duties in accordance with the Audit
Committee’s charter.

The Audit Committee has performed its duties and responsibilities as
delegated by the Company’s Board of Directors with care and at its
fullest capability for the benefits of the Company, the shareholders,
and all the stakeholders.

  Miss Sophavadee Uttamobol

  Chairperson of Audit Committee

  21 February 2011