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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 (DTC0012005)
• Live document
• Sightholders have sole responsibility to ensure
  its implementation
• Independently verified by SGS

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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 DTCs cost

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What is the Standard?
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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

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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

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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

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Routes to Compliance
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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

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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

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Verification What is required?
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What is required?

• Management Processes prove Pipeline Integrity
• Evidenced by
• Systems
• Documentation
• Control Tracking
• Data Integrity
• Security
• Pipeline Management
• Internal Assessment

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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

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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

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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?

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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?

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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

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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

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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

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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

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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

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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

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• Assessment Documentation

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Assessment Documentation

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

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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

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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

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Classification of Breaches

• Material
• any non-compliance issue where there is a total
  breakdown of DTC0012005 Management System, with
  inadequate controls in place to ensure compliance
  with the requirements of the standard
• Show Stopper

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Classification of Breaches

• Major
• a non-compliance issue where there is an absence
  or a total breakdown of a procedure required as
  part of DTC0012005
• 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

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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

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Typical Assessment Checklist
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Group Questions
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Certification
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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

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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

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Reconciliation
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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

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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

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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