Change

Internal risks


Strategic

Implementation of strategic agenda

A failure to properly and fully implement our strategic agenda could adversely affect our company and its businesses.

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. Specific attention is paid to areas such as macro-economic developments, general and financial market developments, competitive situation, performance improvement potential, sustainability, geographical spread, emerging markets, political risks, acquisition and divestment opportunities. Risks are minimized as we operate in attractive industries, have global leading positions and have strong executive leadership in place. As per January 2011, we strengthened our decision-making process and implementation monitoring by implementing an Executive Committee structure which allows us to better manage the strategic agenda. Remuneration systems are tied to performance against key strategic agenda items. For example, our long-term executive remuneration is partly linked to the relevant Dow Jones Sustainability Index (see Remuneration report).

Strategic

Identification of major transforming technologies

We may not be able to identify major transforming technologies in a timely manner, which could lead to loss of our leadership positions.

Risk corrective actions

The risk of missing relevant technology developments is mitigated in three ways. Firstly, we adequately support research and development with a spend level at 2.3 percent of revenue, with more than 45 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 external technologies.

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 – in the context of the company’s Talent Factory initiative – puts emphasis on attracting, retaining, motivating and educating staff. These efforts are supported by a strong Human Resources function and HR instruments such as performance appraisals, the employee survey and leadership identification and review, as well as leadership development, to optimize support to our business. We provide clarity in the working environment through information and communication programs. Special focus is dedicated to high growth markets. Remuneration packages may include long and short-term incentives. However, the Excecutive Committee ensures that employees are not incited to act in their own interest and take risks that are not in keeping with the company’s strategy and risk appetite.

Operational

Management of change

If our management of change is not adequate, this could have a negative impact on productivity and customer focus.

Risk corrective actions

We undertake various restructuring and investment projects that require significant change management and project management expertise. Risk management is an integral part of project management excellence. Senior management is involved in the management of 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. To drive human resources/organizational development and supply chain/sourcing operational excellence, two dedicated members were appointed on the newly established Executive Committee.

Operational

Production process risks

Risks in production processes can adversely affect our results of operations.

Risk corrective actions

We mitigate production risks by spreading out production and operating an adequate inventory policy. This is combined with business continuity planning and appropriate risk transfer arrangements (for example insurances). To achieve our sustainability ambitions, during 2010 we carried out a comprehensive global operational eco-efficiency review at 75 sites. This represented more than 80 percent of the AkzoNobel ecological footprint and focused on four crucial areas: waste management, water consumption, volatile organic compounds (VOCs) and energy. We also raised our safety ambitions in 2010 and want to achieve top quartile safety performance. To achieve this target, we have increased management attention on safety, implemented enhanced process safety, asset integrity and occupational health standards and improved the Health, Safety, Environment & Security audit process.

 

Keyword Search
Copyright © 2011 Akzo Nobel N.V.