docEnterprise Risk Management in Barilla
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Enterprise Risk Management in Barilla
Barilla Business Case Risk Management, Piano Strategico e Organi di Governo Milano, Centro Svizzero July 2nd, 2014 Introducing myself – Matteo Vigo ‐ 38 years old, no kids, one wife… ‐ Citizen of the world ‐ I like sports and good wines ‐ Straightforward ‐ Very good moderator and diplomatic ‐ Increase capability to delegate and active listening skills ‐ Emphatic ‐ In Barilla since June 2010 as Risk Management Director after consultancy and banking institutions international experiences 2 Strictly confidential Today Agenda • Barilla Company Presentation • Enterprise Risk Management in Barilla • Strategic Planning & Risk Management: the “hidden” Link • Risk Disclosure to Top Management, Board and Statutory Auditors 3 Strictly confidential Today Agenda • Barilla Company Presentation • Enterprise Risk Management in Barilla • Strategic Planning & Risk Management: the “hidden” Link • Risk Disclosure to Top Management, Board and Statutory Auditors 4 Strictly confidential Vision, Values and Strategy Storia “We consider the company’s position not as a personal privilege, but as a responsibility for the transmission of values, behaviors and skills that must be nurtured over time for the generations to come.” Guido, Luca and Paolo Barilla BOZZA PER DISCUSSIONE OUR VISION, ASPIRATION and STRATEGY Barilla Group today Storia “In business you live by plans. You live imagining the future. Everything is done for the future.” Pietro Barilla BOZZA PER DISCUSSIONE BARILLA GROUP TODAY 1 2 1 6 1 14 1 2 2 9 Subsidiaries with 30 Manufacturing Sites 16 Commercial Subsidiaries More than 100 Export Countries Barilla is the leader in the world pasta market, in pasta sauces in continental Europe, in bakery products in Italy and in crispbreads in Scandinavia 2013 EMPLOYEES: 8,100 people 2013 TURNOVER: 3.2 billion euro 2013 INVESTMENTS: 141 million euro BARILLA GROUP: OFFICES & PRODUCTION SITES 16 Commercial Sites and 30 Pasta, Sauces, Bakery Production Sites and Mills Italy Europe Rest of Parma Austria World Altamura Belgium Ascoli Piceno Croatia Australia Australia Brasile Brazil Castelplanio Denmark Castiglione d. S. France Cremona Germany Ferrara Greece Foggia Netherlands Galliate Norway Stati Uniti Russia Turchia Singapore Marcianise Poland Singapore Turkey Melfi Slovenia United States Novara Spain Rubbiano Sweden Switzerland Canada Canada Giappone China Messico Japan Russia Mexico Offices Plants Mills BARILLA GROUP TURNOVER BY: BUSINESS AREAS GEOGRAPHICAL AREAS 5% 15% 51% 50% 50% 29% OUR BRANDS, OUR PRODUCTS Barilla holds 13 brands and manufactures 1.7 million tons of products per year Good for You, Good for the Planet: Our way of doing business “Give People food that you would give your own children.” Pietro Barilla BOZZA PER DISCUSSIONE GOOD FOR YOU, GOOD FOR THE PLANET What the world calls «sustainability» for Barilla is a unique and distinctive way of doing business: Good for You, Good for the Planet. This is a strong identity that expresses the Company’s contribution to the sustainable development of communities and the planet, an expression of scrupulous attention to the quality of products and processes that are carried out every day at Barilla. FROM FIELD TO PEOPLE DOUBLE PYRAMID MODEL Developed in 2009, the Double Pyramid one of the most original contributions of the Barilla Center for Food & Nutrition Foundation The Double Pyramid shows how food for which consumption is recommended more frequently is also the one that best preserves the health of our Planet FOOD PYRAMID: REFORMULATION OF EXISTING PRODUCTS AND NEW PRODUCTS 173 63 reformulated products since 2010 according to Double Pyramid principles new products launched in 2013 in line with Barilla’s Nutritional Guidelines Barilla’s Commitment: salt, fat and sugar reduction, no hydrogenated fats, wholegrain cereals increase ENVIRONMENTAL PYRAMID: IMPACT REDUCTION OF OUR PRODUCTS AND PROCESSES ‐ 25% water consumption vs 2008 ‐ 27% CO2 emission vs 2008 ‐ 7% energy consumption per unit of finished product vs 2008 SUPPLY CHAIN PARTNERSHIPS AND TERRITORIAL COOPERATION 70% 87% durum wheat purchased local durum wheat in Italy (cultivated in the through Cultivation same country where Contracts pasta is produced) 85% 98% eggs from more than 2 million cage‐free laying hens totally recyclable sustainable packaging Today Agenda • Barilla Company Presentation • Enterprise Risk Management in Barilla • Strategic Planning & Risk Management: the “hidden” Link • Risk Disclosure to Top Management, Board and Statutory Auditors 19 Strictly confidential Enterprise Risk Management in Barilla – Definitions & Scope Risk is an integral part of doing business and can be defined as... “any uncertain event that could threaten the achievement of Business Objectives and Strategies or the company’s key value drivers” Taking measured risks is therefore our business Our responsibility is to ensure that the current Group Risk Profile is consistent with our Risk Appetite and does not exceed our Risk Capacity, in order to achieve long‐ term sustainable performances Always being able to check whether the Group risk profile is in line with our risk appetite Risk Capacity (maximum risk that the firm could withstand and remain a going concern) Risk Appetite (amount of risk the Group is willing to accept in pursuit value creation) Risk Profile (aggregation of single risks) Single Risks 20 Strictly confidential Enterprise Risk Management – Outside In View • Sets the Risk Appetite and its compliance to the company strategic objectives Board of Directors • Evaluates the ERM framework and the Internal Control System and the effectiveness CEO • Is the owner of the relationship with the Board of Directors: is in charge of reporting to the BoD the wide representation of the company risk profile allowing the Bod to check wheter the risk profile is in line or not with the already set risk appetite • Is responsible for the ERM framework design and implementation Vast majority of listed companies & multinational organizations are now provided with a central unit dedicated to the Enterprise Risk Management (CRO) Source: «Codice di Autodisciplina per le società quotate» 21 Strictly confidential Enterprise Risk Management in Barilla – The CFO role Enterprise Risk Management in Barilla – The CFO role ERM in Barilla – Current Status and Approaches Maturity Level Group Strategic Initiatives Barilla Risk Register Top Management Prioritization and Weaknesses Evaluation 24 Strictly confidential Quantitative Risk Assessment or Qualitative Risk Assessment Enterprise Risk Management – The Risk Current Challenges What • Being more aggressive, what does this mean? ‐ New Geographies ‐ New Channels ‐ New Products ‐ M & A ‐ New Organization How • In which way the Company Strategy and its aggresiveness (Risk Appetite) are linked to Risk Management? 25 Strictly confidential Today Agenda • Barilla Company Presentation • Enterprise Risk Management in Barilla • Strategic Planning & Risk Management: the “hidden” Link • Risk Disclosure to Top Management, Board and Statutory Auditors 26 Strictly confidential Company Strategy and Risk Management – The Hidden Link • Strategic Planning Double the Business by 2020 • Leverage Ratio Trend • Impacts on the Risk Capacity & Risk Appetite 27 Strictly confidential Today Agenda • Barilla Company Presentation • Enterprise Risk Management in Barilla • Strategic Planning & Risk Management: the “hidden” Link • Risks Disclosure to Top Management, Board and Statutory Auditors 28 Strictly confidential ERM Process Risk Identification SA Action Planning session, Incidents, Audit activity & assessement via a uniform method Measurement & Assessment Mitigate, Accept, Transfer, Avoid Governance Risk Response & Control ERM Strategy Monitoring Processes Risk Assertion & Monitoring Culture & Competence Reporting Risk Prioritization Multi – layered reporting on Risks: Matching between Risk Appetite and Risk Profile ‐ Critical Yearly Assertion by Top Management ‐ High ‐ Medium & Low 29 ERM in Barilla ‐ Risk Register EXTERNAL CONTEXT RISKS ‐ ‐ ‐ ‐ ‐ ‐ Competitor ‐ Current Markets ‐ New Business ‐ Retailers ‐ Supply Chain ‐ New Products/Ingredients Customer Wants & Evolution ‐ Trade Shoppers ‐ Current Business ‐ New Business STRATEGIC RISKS ‐ Strategic Partnering / Joint Venture ‐ Business JV ‐ Product Mix ‐ Technology ‐ GDO ‐ ‐ Key Process Outsourcing ‐ Strategic Acquisitions (Investment Evaluation) ‐ ‐ ‐ Technological Innovation ‐ Product ‐ Process/Equipment Country Instability ‐ Political/Government ‐ Social ‐ Financial Regulatory Evolution ‐ Fiscal & Tax ‐ HSE ‐ Quality & Foodsafety ‐ Labour & Social ‐ Other Local Regulations ‐ Strategic Alignment ‐ Product Portfolio ‐ External Communication & Stakeholders Relations ‐ Financial Stakeholders ‐ Nutrition / Opinion Leaders / Scientific Communities ‐ Unions ‐ Media / External Communities ‐ Other Regulators ‐ Customers Macroeconomic Context ICT RISKS ‐ ‐ ‐ ‐ Integrity Access Availability Infrastructure ‐ Shareholders ‐ ‐ Sub Risk Area HUMAN CAPITAL & ORGANIZATIONAL RISKS FINANCIAL RISKS Intellectual Properties, Brands & Trademarks ‐ Company Brand ‐ Meal Solution Brand & Product Naming ‐ Bakery Brand & Product Naming ‐ Raw Materials ‐ Technologies Product ‐ Technologies Process ‐ Risk Area Nature of Risk Market ‐ Interest Rate ‐ Currency ‐ Financial Counterparty ‐ Financial Investment Portfolio ‐ Pension Fund Liquidity & Payments Capital Availability and Debt Management / Cost Commercial Credit & Concentration ‐ ‐ ‐ ‐ ‐ ‐ ‐ Right Persons, Right Skills, Right Roles Internal communications Succession planning Human Capital Company Attractiveness Pay for Value Talent Retention Organizational Effectiveness & Alignment GOVERNANCE & INTEGRITY RISKS ‐ ‐ ‐ ‐ ‐ REPORTING & COMPLIANCE RISKS OPERATIONS RISKS ‐ ‐ ‐ ‐ ‐ ‐ ‐ Strategic Planning & Budget Fiscal Planning & Tax Management Intercompany / Transfer Price Contract Commitment ‐ Financial Covenants ‐ Supply Chain ‐ Trade / Retailers / Distributors ‐ Media Buying ‐ IT Legal Trade Relations & Promotions Product Development / Time to Market Production Efficiency Production Capacity / Availability Strictly confidential ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Logistics ‐ Warehousing ‐ Transportation ‐ Distributors Management Operations / Industrial Investments Sourcing ‐ Raw & Pack Materials / Finished Product Materials Quality ‐ Availability / Alternatives ‐ Raw Materials Price Volatility Mngt ‐ Media Buying (Indirect) ‐ IT (Indirect) Operations Business Continuity Product Safety & Quality Environmental Asset Protection Security & Facilities Employees Health & Safety Code of Ethics & Code of Conduct Policies & Procedures Authority / Limit Internal Fraud /Illegal Acts External Fraud / Illegal Acts ‐ External Financial Reporting ‐ Internal Management Reporting ‐ Internal Control System & Governance Evaluation ‐ Compliance to Laws and Regulations ‐ Fiscal & Tax ‐ HSE ‐ Quality & Foodsafety ‐ Corporate Criminal Liabilities ‐ Antitrust ‐ Privacy ‐ Labour & Social Contributions ‐ Other Local Regulations ERM in Barilla ‐ Risk Rating 4 Rating Categories: Low, Medium, High and Critical Freq Rare Unlikely Possible Likely Frequent Recurrent Insignificant Low Low Low Low Low Medium Minor Low Low Low Low Medium High Moderate Low Low Low Medium High Critical Significant Low Low Medium High Critical Critical Major Medium Medium High Critical Critical Critical Catastrophic Medium High Critical Critical Critical Critical Sev 31 Strictly confidential ERM in Barilla ‐ Risk Assessment Process Group Strategic Initiatives Barilla Business as Usual Top Management Prioritization and Weaknesses Evaluation 32 Strictly confidential The Enterprise Risk Management Output Yearly Risk identification sessions are performed through: ‐ one to one interviews with all Group Directors ‐ risk identification and assessment meetings with all direct reports (N‐2) ‐ One to one validation session with each organizational unit Risk Champion All identified risk events have been scored according to the Barilla risk assessment methodology The overall risk collection allows the Company Risk Profile shaping: ‐ Strategy @ Risk (7 issues, GLT members input) ‐ 11 Critical Risks ‐ 18 High Risks ‐ 50 Medium Risks ‐ 23 Low Risks Single Risks 33 Risk Management Output Disclosure • CEO & GLT discuss about Company Top Risks in late September in order to define the risk based resource allocation within the BDG process (Mitigating Action Plans adequacy and funding) • The Risk Management Output feeds the Audit Plan • Board of Directors (CdA) is informed about this output once a year by the CFO • Statutory Auditors receive periodical updates directly from Risk Management also contributing to steer the focus • Lenders and Investors are informed about the RM process 34 Strictly confidential
