Risk management

Doing business inherently involves taking risks. By seeking to take balanced risks, we strive to be a successful and respected company. Risk management is an essential element of our corporate governance and strategy development. We continuously strive to foster a high awareness of business risks and internal control to provide transparency in our processes and operations.

We continuously strive to foster a high awareness of business risks and internal control.

The Board of Management and Executive Committee are responsible for managing the risks associated with our activities and the establishment and adequate functioning of appropriate risk management and control systems (see Statement of the Board of Management).

Risk management framework

Our risk management framework is in line with the Enterprise Risk Management – Integrated Framework of COSO and the Dutch Corporate Governance Code. It provides reasonable assurance that our business objectives can be achieved and our obligations to customers, shareholders, employees and society can be met.

Risk management framework (graphic)

For more information on our risk management framework, including clarity on risk appetite, visit the Risk management section on our website.

Risk management in 2021

Risk management is an embedded company-wide activity, under the responsibility of the Board of Management and Executive Committee, focused on the areas of major risk exposure.

During 2021, we held a significant number of enterprise risk workshops across the organization, as well as one workshop focused on fraud risk. Identified risk scenarios are prioritized by responsible management teams and functional experts, followed by the definition of adequate mitigating actions. We consider risk assessment and mitigation to be a continuous process, carried out against the background of an evolving risk landscape, which includes short, medium and longer-term challenges.

The symbols alongside the risk descriptions opposite represent management’s assessment of risk development, compared with 2020.

For information related to financial risk, see Note 27 of the Consolidated financial statements.

Symbols indicate the following:

Risk assessed to increase.
Risk assessed to remain fairly stable.

External – Strategic

Global economy and the geopolitical context

The world’s unpredictable geopolitical situation, with its impact on supply and demand and the highly competitive markets in which we operate, requires our ongoing attention to protect our financial performance.

Mitigating actions

  • Geopolitical assessment as part of investment decisions and medium-term operational planning
  • Deployment of commercial and procurement excellence programs
  • Continued focus on operational cost, complexity reduction and margin management

Supply disruptions and key raw material shortages

Supply disruptions due to continued worldwide supply shortages, climate change impacts and catastrophic events on the supplier side require continuous attention to protect our service levels to our customers.

Mitigating actions

  • Maintain and further improve strong industry and market intelligence analysis of suppliers and raw material market
  • Drive supply chain network design, end-to-end from supplier to end customer
  • Roll out raw material plan through integrated business planning
  • Assess climate change impact and develop mitigation plans for own operations and key suppliers’ locations (see Sustainability statements)
  • Continue to apply an internal carbon price for large investment decisions (see Sustainability statements)
  • Continue to deploy our sustainable product portfolio management to further develop low carbon and more circular solutions (see Sustainability statements)

Pandemic

The risk of a global pandemic materialized in 2020. The company acted to safeguard employee health and well-being and minimize business disruption.

Mitigating actions

  • Safety guidelines for our staff, contractors and/or third-party suppliers working on our premises, updated in real time, based on local regulations/guidance
  • Focus on well-being support to our staff
  • Agility of supply chain and distribution channels
  • Continuous monitoring of pandemic impact, including updating of forecasts
  • Continued focus on operational cost and complexity reduction

External – Operational

Information technology and cybersecurity

With the increasing frequency and magnitude of cybersecurity threats facing us, we’re taking additional measures to strengthen our security to be better able to respond and recover as quickly as possible in the event of an incident impacting our company.

Mitigating actions

  • Continually reinforcing a cyber-security culture (intensified training, awareness creation)
  • Continuation of system rationalization to remove redundant legacy systems where they exist
  • Increasing collaboration with suppliers on various detection and response activities and measures

Internal – Strategic

Organic growth

Market leadership in those parts of the world where our markets are growing is one of the cornerstones of our strategy. A global presence, in combination with locally tailored go-to-market models, is an essential ingredient of success.

Mitigating actions

  • Drive BU strategic mandates underpinning Grow & Deliver strategy
  • Investment in sales capability and deployment of commercial excellence programs
  • Driving demand planning, product innovation and supply chain agility through integrated business planning

Innovation, identification and successful implemen­tation of major transforming technologies

Our leadership positions and future success are underpinned by investment in research, the adoption of major transforming technologies and continuous development of the talents and skills of our people.

Mitigating actions

  • Improve product management lifecycle through the Product Management Network
  • Build leading capability and value chain collaboration to underpin our 50% carbon reduction commitment by 2030
  • IT resources to support the business in new technology applications

Internal – Operational

Attraction and retention of talent

Our organization’s ability to attract and retain talent in a tightening talent market and rapidly evolving business environment determines, to a large extent, the success of our organization to deliver on our targets.

Mitigating actions

  • Strengthen AkzoNobel’s employer value proposition, based on our commitment to employee growth and the company’s purpose
  • Focus on talent acquisition plan, talent development programs and succession planning (e.g. Talent and Opportunity Review, Young AkzoNobel, nomination of Talent Managers)
  • Embed Talent Management Framework driving talent and leadership development