Forevermark & Pipeline Integrity

2. Forevermark & Pipeline Integrity • The Forevermark • DTC Forevermark is a ‘Mark of Trust’ that gives you peace of mind in your diamond • Pipeline Integrity and the Forevermark • DTC Standard (DTC001:2005) • “Live” document • Sightholders have sole responsibility to ensure its implementation • Independently verified by SGS

3. Forevermark & Pipeline Integrity • Timelines & Costs • Before stones can be delivered for manufacture Sightholder must be certified Pipeline Integrity Compliant • Completion before 31st March 06 • Target January/ February • Audit at DTC’s cost

4. What is the Standard?

5. What is the Standard? • Standard developed with British Standards Institute • Provides framework for evidence of pipeline integrity • Compliance to Standard a pre-requisite for taking part in the scheme • Not a Pass or Fail but an assurance that risks are managed

6. What is the Standard? • DOES NOT: Detail how to meet the criteria • DOES NOT: Seek to impose procedures or to change ways of working • DOES NOT: Cover methods or procedures for the actual cutting/polishing of the stones • DOES NOT: Confer immediate status for Forevermark

7. What is the Standard? – Key Component • Separation: • Keeping potential Forevermark stones physically separate from all others at every stage • Separate processing, packaging, storage AND/OR • Traceability: • Ability to track and locate stones at every stage • Ability to track the history of any stone back to Sightbox and identify each activity and outcome

8. Routes to Compliance

9. Routes to Compliance - What you need to do? • Appoint assessor (internal or independent external 3rd party) to review operations against standard • Assessor arranges SGS visit - average 6 weeks compliance process • SGS Visit - Reviews & reports on operations • Sightholder compliant • Sightholder corrective actions & evidence to SGS a) Submission of documentation or b) SGS revisit operation • Compliance then regular reconciliation & 6 monthly internal review

10. Retailer Participation Criteria • Mandatory Criteria • Willingness to invest in Forevermark project • Letter of participation commitment to their Sightholder partner • Agreement to best endeavours to DTC Best Practice Principles • Comparative Criteria • Sales of jewellery containing 30+ point stones • Significance of sales of diamond jewellery • Independent source (Television Audience Measurement - TAM) on all above the line media spend

11. Verification – What is required?

12. What is required? • Management Processes prove Pipeline Integrity Evidenced by • Systems • Documentation • Control & Tracking • Data Integrity • Security • Pipeline Management • Internal Assessment

13. 1. Systems • Need to show • Sightholder overall responsibility for entire chain • Organisation Chart defining responsibilities • Procedures for reviewing and improving the system • Procedures for corrective and preventative actions

14. 2. Documentation • Procedures controlling each stage • Can be paper or IT-based (simple = flow diagram) • Understood by relevant personnel • Evidence that they have been communicated/ trained in the procedures • Used at each Stage • Evidence that the procedures are available and live

15. 3. Control & Tracking Regular Reviews • Systems MUST be able to evidence that stones can be located and tracked • Both from stone into records • And from records to stone • Must be traceable to original Sightbox • Completeness • Is every stage covered? • Is there sufficient detail? • Are there any gaps? • What happens if an anomaly is found?

16. 4. Data Integrity • Accuracy • How is accuracy ensured? • Who is checking the data? • What happens if an anomaly is found? • Cross-checking data across systems • Robustness • Can data be changed? • Who is authorised to do this? • Are all changes traceable? • How is data stored to ensure retention periods are met?

17. 5. Security • Data Security (physical and electronic) • Storage/Retention • Ability to change data • Back-up/archive procedures • Disaster recovery • Physical Security • Secure pipeline • Storage of potential Forevermark diamonds

18. 6. Pipeline Management – Associated entities • Overall responsibility for pipeline compliance remains with Sightholder • Owned entities need to implement equivalent systems • Evidence of internal assessment • Potentially open to verification • Sub-contractors • Choice of implementing systems as above or Sightholder monitoring • Minimum: Key criteria and controls need to be understood and implemented • SGS reserves right to visit sub-contractor

19. 6. Pipeline Management - Jewellery & Retail • Jewellery Manufacture • Responsibility for Record Keeping • Availability of records for review if needed • Retail • Potential visits to check on stones being sold

20. 7. Internal Assessment • Assessor - Internal or Third Party • Independent of the Operational Functions • Training and Experience Required • Audit Experience & Understanding of systems • Authority to implement changes and recommend improvements • Ultimate authority to stop production • If Third Party Sightholder still retains responsibility for management of process • Ensure all controls are present and that system is functioning • System tested with real or test data

21. 7. Internal Assessment • Assessment plan to ensure all aspects covered over the 6-month period – can be 1-off or staggered • Test the system • Horizontal checks – check a function e.g. record keeping • Vertical Checks – track Sightbox or Single Stone • Communicate Results • information sharing is critical to maintenance and improvement of system • Obtain and share reconciliation records with SGS only

22. Main Points to Note…… • Criteria apply to every stage from receipt of Sightbox to marking of goods • Particular focus is needed at any stage where physical transfer of diamonds is involved • Assessment should test the system thoroughly • Non-compliances are an opportunity to improve the system – should be seen as positive not negative • Assessment should look for evidence • Documents • Testimony

23. Assessment Documentation

24. Assessment Documentation • Audit Checklist • Audit Supplement for Sub-Contractors • Assessment Report • Assessment Completion Record • Corrective Action Request

25. Assessment Criteria • Completeness and timeliness of internal assessments • Availability of evidence of compliance • Positive approach • Opportunity to show how the facility complies • Not a policing exercise • Evidence that the system is working and is used to drive improvements

26. Non-Compliances • Three levels of non-compliance recorded • Material – show stopper • Major – must be rectified before letter of compliance can be issued • Minor – needs to be rectified in reasonable period depending on issue. If ignored could lead to escalation to Major

27. Classification of Breaches • Material • any non-compliance issue where there is a total breakdown of DTC001:2005 Management System, with inadequate controls in place to ensure compliance with the requirements of the standard • Show Stopper

28. Classification of Breaches • Major • a non-compliance issue where there is an absence or a total breakdown of a procedure required as part of DTC001:2005 • OR a significant occurrence of minor non-conformities against a particular element or within a single department or activity • OR where Minor Breaches are not addressed within the timeframe agreed in the Corrective Action Plan • Major non-compliances are subject to re-audit/monitoring by SGS • The status can change to “minor” when a corrective action plan is in place and is being implemented

29. Classification of Breaches • Minor • a single observed nonconformity with respect to the standard or a procedure required as part of the Management System • May be able to be corrected on the day or may require a Corrective Action Plan • Corrective Actions must be followed up or the non-compliance could be upgraded to Major

30. Typical Assessment Checklist

31. Group Questions

32. Certification

33. Conditions • Certificate of Compliance will be issued where: • Significant entities or a sufficient sample have been subject to verification audits • Sample of entities to be audited to be agreed by SGS in each case • No Material non-compliances • Major Issues with an agreed Corrective Action Plan

34. On-going Maintenance • Regular assessments to be undertaken and evidence provided • Reports of activity and evidence of completion of corrective actions to be provided • Reconciliation records to be provided • Annual Verification Visit

35. Reconciliation

36. Why Reconciliation? • Important aspect of Pipeline Integrity • Supports the assessment process and gives the Sightholder confidence • Additional layer of security to show that Forevermark diamonds are of DTC origin • Applies only to DTC Sightboxes used in the Forevermark • Reconciliation data will be sent to SGS not DTC for validation • Undertaken at regular intervals or on request from SGS

37. What is Reconciliation? • SGS notifies Sightbox to be reconciled based on a marked stone at six-monthly intervals • Reconcile Eligible & Non-Eligible diamonds to original DTC Sightbox • Reconcile final polished manufactured from Eligible diamonds to the original DTC Sightbox detailing: • DTC Sightbox No; Sight No; Year and description of goods • No. carats identified as being Eligible & No. carats removed as being Non-Eligible • Details of resultant polished from Eligible diamonds by Colour, Clarity and Yield, in terms of carats

38. SGS and Pipeline Integrity - Summary • Not pass or fail • Key Component - Separation & Traceability • Common Gap – Documentation • On-going evaluation • Reconciliation • SGS does not tell you what to do but advise things to do