Givaudan has established an internal risk management process that is based on the Givaudan Enterprise Risk Management Charter. It focuses on identifying and managing / exploiting risks.
Managing risk is an integral part of Givaudan’s business. Enterprise Risk Management (ERM) is the process of assessing, treating and monitoring the effects of uncertainty that may affect the achievement of Givaudan’s objectives, especially its publicly stated strategic objectives, or jeopardise Givaudan’s long-term business success. 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 risk, to manage these risks competently at the right level of the organisation, and to seize related business opportunities.
The Board of Directors defines the strategic risk management framework. This process is under the responsibility of the Executive Committee. The risk management process follows a structured assessment, review and reporting cycle that is coordinated by the Corporate Compliance Officer to ensure a harmonised Group-wide approach.
For each identified strategic top-level Company risk a member of the Executive Committee is designated as the risk owner with the responsibility to manage the risk on a Group-wide basis. Once annually the Executive Committee reports to the Board on the risk management process, the strategic risks and the mitigation actions.
Givaudan’s ERM contributes to:
- safeguarding Company value and assets and a protection of shareholder interests
- exploiting strategic opportunities to further create Company value
- improving awareness amongst all key internal stakeholders of the nature and magnitude of the Company’s risks
- providing risk-based management information for effective decision-making
- improving compliance with good corporate governance guidelines and practices as well as applicable laws and regulations.
Enterprise Risk Management framework
Corporate internal audit provides assurance on the effectiveness of the risk management process.
Please see our latest Integrated Annual Report for more information on risk management at Givaudan.
Risk categories and response
Business model risk: Our business model might become obsolete, specifically through the advent of digitalisation Risk of changes in consumer preferences: Consumers may change their preferences for products with fragrances and/or flavours they want to consume and how they acquire them. Customer risk: Changes at our customers may change their way of working with us and may negatively impact our own strategy. Competition risk: Changes in behaviour of existing competitors or new entrants may change the competitive landscape, in particular in relation to new business models. This may impact negatively on Givaudan’s competitive position in one or more markets. Risk of climate change / water scarcity: Climate change may lead to a number of effects which in turn impact our ability to operate. These may include water scarcity at one or more of our manufacturing sites or issues with our supply, in par-ticular the availability of our key natural resources. As such, climate change poses a significant risk for Givaudan, but it also presents an opportunity to adapt its processes and act to mitigate the effects. Disruption / breakdown of operations: A breakdown of our operations may threaten our ability to produce and deliver quality products/services at competitive prices on a timely basis. Such breakdown may be caused by internal or external factors. Disruption of supply chains / suppliers: A disruption in the supply of the raw materials we require for our production or volatility of raw material prices may negatively impact our ability to produce at competitive prices and in a timely manner. Such disruption may be caused by external factors such as climate change or a breakdown at one or more of our suppliers. Environment, Health and Safety and operational risk management: If Givaudan should operate in a way that is harmful to the environment and/or causes community nuisance (odour emissions, waste water), this could result in fines, reputational impact or even the loss of the Company’s licence to operate. Information technology risk: In a fast moving digital world, information and communication technologies are critical for Givaudan to address new consumer behaviours and to collaborate with its customers to give them the best experience. However, digitalisation also creates new threats and requires a permanent monitoring of information security risks and an extension of the risk assessment scope. 2019 Financial report, page 50. Please consult the Financial report regarding our financial risk management. Product quality / product safety risk: A faulty product or one that is not compliant with regulations or is non-performing could expose Givaudan to consumer health issues, customer complaints, warranty claims, returns and re-runs, product liability claims or litigation and lead to loss of revenues, market share and business reputation. Legal and compliance risks: Should our employees, especially key individuals within the organisation (Board members, Executive Committee members, senior management) display or tolerate behaviour that is illegal or unethical, this could lead to reputational as well as financial damage to Givaudan.
Givaudan’s growth path of organic expansion and acquisitions inevitably involves some essential large-scale projects. EHS, as a full team member, is involved from the beginning of each project to assess and minimise risks. Our EHS teams support the design of all new building activities so that, in EHS terms, the plants we build today use learnings from the past and are fit for the future. In 2019, a number of new technologies for environmental protection in the area of odour emissions control were successfully tested on our sites.
In addition, Givaudan supports, and in many cases leads, industry-wide programmes of the respective industry associations (the International Fragrance Association and the International Organization of the Flavor Industry) for ensuring the safe use of flavours and fragrances in consumer products.