Annual Report 2007
Corporate governance
Examples of management of specific business risks, and the systems Santos has in place to manage these risks, include the following:

Type of risk Method of management
Environmental and
safety risk
Environmental and safety risk is managed through:
• a comprehensive Environmental Health and Safety Management System based on Australian Standard 4801 and International Standard 14001;
• environment, health and safety committees at Board and Management levels;
• the retention of specialist environmental, health and safety staff and advisors;
• regular internal and external environmental, health and safety audits; and
• imposing environmental care and health and safety accountability as line management responsibilities.
Exploration and
reserves risk
Exploration risk and uncertainty is managed through:
• internal control systems which include formalised risk and resource assessment of exploration prospects;
• corporate review in both prospect and hindsight; and
• Board approval of exploration budgets.
The Company has a Reserves Management System that is consistent with the Society of Petroleum Engineers Petroleum Resources Management System. External reserves reviews and audits are also undertaken as necessary.
Investment risk The Company has clearly defined procedures for capital allocation and expenditure. These include:
• a portfolio management system;
• annual budgets;
• detailed appraisal and review procedures;
• project management processes;
• levels of authority; and
• due diligence requirements where assets are being acquired.
Financial reporting
and treasury
• A comprehensive budgeting system exists with an annual budget approved by the Board.
• Monthly actual results are reported against budget and quarterly forecasts for the year are prepared and reported to the Board.
• Treasury operations are subject to a comprehensive system of internal control, and speculative transactions are prohibited.
• Further details relating to financial instruments and commodity price risk management are included in Note 38 to the Consolidated Financial Statements.
Operational risk • All significant areas of Company operations are subject to regular reporting to the Board.
• The Board receives regular reports on the performance of each functional area, including: operations; gas marketing and commercialisation; liquids marketing; legal and secretariat; geoscience, exploration and new ventures; development; finance; safety; human resources; government; investor relations; climate change, sustainability, cultural heritage and other environmental matters.