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Risk management

An integral part of our business

We have robust structures and processes in place to ensure the effective management of risks to our business, and we are committed to the highest ethical standards in the conduct of our business.

Enterprise Risk Management (ERM)

ERM is the process of assessing, treating and monitoring the effects of uncertainty that may affect the attainment of Givaudan’s objectives, especially its publicly stated strategic objectives, or jeopardise its long-term business success. Managing risk is an integral part of Givaudan’s business. We operate a structured system of identifying, assessing and deciding on responses to mitigate key risks.

Givaudan seeks to consciously take the appropriate amount of risks, to manage these risks competently at the right level of the organisation, and to seize related business opportunities. The Board of Directors is responsible for defining and approving the ERM approach, while the execution of the overall ERM process is delegated to the Executive Committee.

Principles and responsibilities

Our ERM approach is based on our Enterprise Risk Management Charter, which was updated by the Board of Directors in 2017. The approach is compliant with applicable laws, SIX Directives, the Swiss Code of Best Practice for Corporate Governance and in line with best practice. Givaudan uses the COSO ERM:2016 framework and ISO 31000 as references.

The ERM Charter describes the ERM principles, framework, process and methodology and governance, and defines the associated roles and responsibilities and corresponding delegated authorities. It also lays down the framework for the reporting mechanism. ERM applies to our businesses as well as to support functions. It reviews all types of risks (threats and opportunities) in terms of their nature, their source and their consequences. For the top Company risks, the consequences are stated in terms of impact on the EBITDA of the Group.

Givaudan’s ERM contributes to, among other things, safeguarding Company value and assets and a protection of shareholder interests; exploiting strategic opportunities to create further Company value; and improving awareness among all key internal stakeholders of the nature and magnitude of the Company’s risks.

The annual ERM process includes a structured and comprehensive identification and compilation of essential internal and external threats and opportunities on the basis of an overall risk universe, which includes internal and external benchmarks. The ERM process also includes analysis and assessment of the threats and opportunities so identified and determination of their likelihood of occurrence and corresponding impact to understand the underlying risk drivers.

Givaudan’s management is accountable for ensuring risks are appropriately and adequately identified and analysed in a timely manner. Risk response actions are taken at individual and combined levels. Annual management reports on the status of the risks and risk response actions to the Board of Directors.

The annual assessment and management process is coordinated by the Corporate Compliance Officer. Corporate Internal Audit provides assurance on the effectiveness of the risk management process.

At the strategic level, a member of the Executive Committee is designated as the risk owner for each top Company risk. He or she has the responsibility for managing the risk on a Group-wide basis. Risks below the level of top risk are clustered by risk area. Each cluster also has an Executive Committee member as its owner, though the actual risks are owned at the appropriate level of management.

Risk categories

In 2017, Givaudan performed an in-depth risk review process to re-evaluate the Company’s risks and focused on further risk response actions for the top Company risks on the basis of the work done in previous years.

The areas of risk reviewed included strategic risks such as those concerning our business model, consumer preferences, customers and competition; sustainability risks such as climate change and water scarcity; operational risks such as breakdown of operations and disruption of supply chain, and EHS and IT risks; financial risks; and legal and compliance risks.

For the full version please visit page 49 of the Annual Report.