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Risk management


 

AkzoNobel risk management
framework
 
Risk management framework (graphics)

Doing business inherently involves taking risks, and by taking measured risks we strive to be a sustainable company. Risk management is one of the essential elements of our company’s corporate governance. This calls for creating a proper balance between entrepreneurial attitude and risk levels associated with business opportunities. We foster a high awareness of business risks and internal control procedures, geared to safeguarding our risk appetite and providing transparency in our operations.

AkzoNobel risk management framework

Through our risk management framework we want to provide reasonable assurance that our business objectives can be achieved and our obligations to customers, shareholders, employees and society can be met. The AkzoNobel risk management framework encompasses the elements in the framework as shown.

Our risk management framework complies with the Enterprise Risk Management – Integrated Framework of COSO (the Committee of Sponsoring Organizations of the Treadway Commission) and the Dutch Corporate Governance Code. The procedures and results are reviewed by the Board of Management and discussed with the Supervisory Board.

Risk management in 2008

Scoping of the 2008 risk management activities for AkzoNobel was performed by the Board of Management, business unit Managing Directors and Corporate Directors in association with the risk management function. The emphasis has been on the integration of the former ICI in the AkzoNobel risk management framework and the introduction of risk management as an integral part of project management excellence. More than 100 facilitated Enterprise Risk Management workshops and a multitude of self-assessments have been carried out with management and project teams.

In facilitated Enterprise Risk Management workshops, more than 5,000 risk scenarios were identified and prioritized by the responsible managers and functional experts. All major risks were responded to by the unit that identified them. The outcome of all risk assessments was reported to the next higher management level, as part of our Business Planning and Review cycle. At all levels, risk profiles were shared by managers. In the bottom-up consolidation process, about 20 percent of the risks were taken to the next management level, where they were re-assessed, either because of the materiality of the risk exposure and/or because of the accumulated effect. The major risk factors for our company, resulting from risk consolidation and the subsequent risk assessment by the Board of Management, are presented in the next paragraph. For 2009, the emphasis will be on further organizational alignment of risk management, compliance, internal control systems and processes.

Major risk factors

Under the explicit understanding that this is not an exhaustive enumeration, our major risk factors that may prevent full achievement of our objectives are listed in detail from the next page onwards. There may be current risks that the company has not fully assessed and are currently identified as not having a significant impact on the business, but which could at a later stage develop a material impact on the company’s business. The company’s risk management systems endeavor the timely discovery of such incidents.

An overview of our major risk factors is provided in the table below, where the five risks that we currently assess as the most significant for the next five years are indicated.

Major risk factors assesed by AkzoNobel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cause

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internal

 

External

Objectives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strategic

 

 

Risk
• Strategy implementation
• Identification of major transforming    technologies
• Integration of acquisitions

 

 

 

Risk
Adaptation to economic downturn
• International operations
• Stakeholder support

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational

 

 

Risk
People attraction and retention
• Change project management
• Production risks

 

 

 

Risk
Customer
• Raw material sourcing
• Energy price differences
• Environmental liabilities
• Product liabilities


Top 5 risk
Top 5 risk
Top 5 risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial

 

 

 

 

 

 

 

Risk
• Pensions
• Impairment
• Tax payments
• Exchange rate fluctuations
• Credit rating
• Access to funding


Top 5 risk
Top 5 risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compliance

 

 

 

 

 

 

 

Risk
• Laws and regulations

 

 

 

 

 

 

 

 

 

 

 

 

 

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