Change

Internal Strategic

Identification of major transforming technologies

Our success depends on the sustainable growth of our business through research, development and innovation. If we are not able to identify major transforming technologies in a timely manner, this may lead to the loss of our leadership positions and adversely affect our business and results.

Risk corrective actions

The risk of missing relevant technology developments is mitigated in four ways. Firstly, we adequately support research and development with a spend level of between 2 and 3 percent of revenue (2012: 2.5 percent or €374 million), with 50 percent spent on major projects and technology developments. Secondly, our key projects have detailed technology roadmaps which assess the most appropriate routes. Thirdly, we are actively developing our open (external) innovation capability to identify and utilize the most promising technology platforms. These technology platforms are used as an integral part of VISTA projects, where we define technology and market opportunities. Finally, we have created two Science Advisory Boards (SABs) to advise and guide the RD&I Corporate Director and the RD&I Leadership Team on diverse aspects of external research and the benchmarking of our own R&D capabilities. Specifically, the Boards are helping us to identify, assess and evaluate scientific and technological opportunities for sustainable innovation. Where appropriate, they also suggest centers and individual experts the company might consider developing relationships with to advance identified opportunities.

Internal Operational – Top five risk

Attraction and retention
of talent

Our ambitious growth plans may not be achieved if we fail to attract and retain the right people.

Risk corrective actions

Growing our business calls for the need to grow our people. Therefore, AkzoNobel puts emphasis not only on attracting and retaining employees, but also on motivating them and developing their capabilities. As part of this drive, we are stepping up our actions to strengthen our corporate identity and to build a functionally excellent One HR organization focused on best-in-class talent management. Our ultimate goal is to be recognized internally and externally as the employer of choice. To achieve this, we have a number of priority focus areas including professionalizing recruitment, improving our talent management processes and harmonizing key HR administration processes to provide efficient service and free up time for the business partnering that is crucial to helping us attract, develop and retain superior people. In addition, as part of the overall performance improvement program, we have set up the AkzoNobel Academy. This is specifically focused on building capability across the company and, in particular, at providing a higher level of general leadership, project and change management skills, as well as creating a consistent approach to specific functional capabilities.

Internal Operational

Production process
risks

Risks in production processes can adversely affect our results. These risks concern areas such as personal health and safety, process safety, product safety and operational eco-efficiency. Unlikely scenarios can involve major incidents with a high impact for our organization, causing business continuity risks and reputational damage.

Risk corrective actions

We held a company-wide Safety Day in 2012 focused on launching our TakeCare and Life-Saving Rules programs. The TakeCare program is the umbrella for all existing and future safety initiatives at business and central level, introducing one safety mission and identity. The Life-Saving Rules program introduces a “golden principle” and eight basic safety rules that will be mandatory as of April 2013, for all AkzoNobel employees and all our contractors. We continue with our business continuity planning and have appropriate risk transfer arrangements in place (for example insurance). To achieve our operational eco-efficiency (OEE) ambitions, we have initiated improvement activities based on our 2010 review of waste management, water consumption, volatile organic compounds (VOCs) and energy. We are actively engaging in stimulating continuous improvement on OEE and initiating process and technology changes which will deliver step change improvements. To help realize our safety ambitions, we have defined clear KPIs and increased management attention on people safety, as well as implementing enhanced process safety (such as asset integrity) and occupational health standards and improving the HSE audit process.

Internal Strategic

Implementation of
strategic agenda

A failure to properly and fully implement our strategic agenda could adversely affect our company and its businesses. Our ability to grasp future opportunities might be hampered by the speed of the implementation of core processes and performance improvement programs.

Risk corrective actions

The appropriateness of our strategic agenda, our performance against this agenda and our governance structure is continuously monitored by the Executive Committee and the Supervisory Board. Risks are minimized as we operate in attractive industries, have global leading positions and have strong executive leadership in place. In August 2012, we implemented a new monthly Operational Control Cycle designed to manage our business in a more operational way, with particular emphasis on a forward-looking outlook. A modification to the executive remuneration system will be made to ensure executives are fully focused on the company’s overall priorities. Furthermore, our long-term executive remuneration is partly linked to our ranking in the Chemicals supersector of the Dow Jones Sustainability Index (SAM assessment). (See Remuneration report chapter in the Governance and compliance section).

Internal Operational – Top five risk

Management of change

We undertake various restructuring, investment and performance improvement projects that require significant change management and project management expertise. Failure to manage these change projects appropriately, or to implement such projects, may lead to inability to achieve our strategic ambitions.

Risk corrective actions

Risk management is an integral part of project management excellence. Senior management is involved in all critical projects that are prioritized and supervised by the Executive Committee to ensure an aligned and integrated vision and thrust from the top for the company’s change agenda. Major initiatives, such as the performance improvement program and business restructuring projects, are under the direct supervision of dedicated Executive Committee members. Furthermore, we have included project management and change management curricula in our AkzoNobel Academy.

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