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Barilla Business Case
Risk Management, Piano Strategico e Organi di GovernoMilano, Centro Svizzero
July 2nd, 2014
2
Introducing myself – Matteo Vigo
Strictly confidential
‐ 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 Directorafter consultancy and banking institutions international experiences
3
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
Strictly confidential
4
Today Agenda
Strictly confidential
• Barilla Company Presentation
• Enterprise Risk Management in Barilla
• Strategic Planning & Risk Management: the “hidden” Link
• Risk Disclosure to Top Management, Board and Statutory Auditors
BOZZA PER DISCUSSIONE
StoriaVision, Values and Strategy
“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 timefor the generations to come.”
Guido, Luca and Paolo Barilla
OUR VISION,ASPIRATION andSTRATEGY
BOZZA PER DISCUSSIONE
StoriaBarilla Group today
“In business you live by plans. You live imagining the future.
Everything is done for the future.”
Pietro Barilla
2013 EMPLOYEES:8,100 people
2013 INVESTMENTS:141 million euro
2013 TURNOVER:3.2 billion euro
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
BARILLA GROUP TODAY
9 Subsidiaries with 30 Manufacturing Sites16 Commercial SubsidiariesMore than 100 Export Countries
2
2
11
1
1
6
142
BARILLA GROUP: OFFICES & PRODUCTION SITES
ParmaAltamuraAscoli PicenoCastelplanioCastiglione d. S.CremonaFerraraFoggiaGalliateMarcianiseMelfiNovaraRubbiano
Italy
16 Commercial Sites and 30 Pasta, Sauces, Bakery Production Sites and Mills
AustriaBelgiumCroatiaDenmarkFranceGermanyGreeceNetherlandsNorwayPolandSloveniaSpainSwedenSwitzerland
Europe
AustraliaBrasileCanadaGiapponeMessicoRussiaStati UnitiTurchiaSingapore
AustraliaBrazilCanadaChinaJapanMexicoRussiaSingaporeTurkeyUnited States
Rest ofWorld
MillsOffices Plants
BARILLA GROUP TURNOVER BY:
BUSINESS AREAS GEOGRAPHICAL AREAS
50%
50% 51%
29%
15%
5%
OUR BRANDS, OUR PRODUCTSBarilla holds 13 brands and manufactures 1.7 million tons of products per year
BOZZA PER DISCUSSIONE
Good for You, Good for the Planet:Our way of doing business
“Give People food that you would give your own children.”
Pietro Barilla
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 BarillaCenter for Food & Nutrition Foundation
The Double Pyramid shows how food for which consumption is recommended morefrequently is also the one that best preserves the health of our Planet
reformulated products since 2010 according to Double Pyramid principles
new products launched in 2013 in line with Barilla’s Nutritional Guidelines
FOOD PYRAMID: REFORMULATION OF EXISTING PRODUCTS AND NEW PRODUCTS
173 63
Barilla’s Commitment: salt, fat and sugar reduction, no hydrogenated fats, wholegrain cereals increase
ENVIRONMENTAL PYRAMID: IMPACT REDUCTION OF OUR PRODUCTS AND PROCESSES
‐ 27% CO2 emission vs 2008
‐ 25% water consumptionvs 2008
‐ 7% energy consumptionper unit of finished product vs 2008
SUPPLY CHAIN PARTNERSHIPS AND TERRITORIAL COOPERATION
durum wheat purchased in Italy
through Cultivation Contracts
70%local durum wheat(cultivated in the
same country where pasta is produced)
87%
eggs from more than2 million cage‐free
laying hens
85%totally recyclable
sustainablepackaging
98%
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Today Agenda
Strictly confidential
• Barilla Company Presentation
• Enterprise Risk Management in Barilla
• Strategic Planning & Risk Management: the “hidden” Link
• Risk Disclosure to Top Management, Board and Statutory Auditors
20
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
Enterprise Risk Management in Barilla – Definitions & Scope
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
Single Risks
Risk Profile (aggregation of single risks)
Risk Appetite(amount of risk the Group is willing to accept in pursuit value creation)
Risk Capacity(maximum risk that the firm could withstand and remain a going concern)
Always being able to check whether the Group risk profile is in line with our risk appetite
Strictly confidential
Enterprise Risk Management – Outside In View
Source: «Codice di Autodisciplina per le società quotate» 21
• Sets the Risk Appetite and its compliance to the company strategic objectives
• Evaluates the ERM framework and the Internal Control System and the effectiveness
Board of Directors
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 & multinationalorganizations are now provided with a central unit dedicated to the Enterprise Risk Management (CRO)
Strictly confidential
Enterprise Risk Management in Barilla – The CFO role
Enterprise Risk Management in Barilla – The CFO role
24
ERM in Barilla – Current Status and Approaches
Strictly confidential
Top Management Prioritization
and Weaknesses Evaluation
Quantitative Risk Assessment
or
Qualitative Risk Assessment
Barilla Risk
Register
Group Strategic Initiatives
Maturity Level
Strictly confidential25
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?
Enterprise Risk Management – The Risk Current Challenges
26
Today Agenda
Strictly confidential
• Barilla Company Presentation
• Enterprise Risk Management in Barilla
• Strategic Planning & Risk Management: the “hidden” Link
• Risk Disclosure to Top Management, Board and Statutory Auditors
27Strictly 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
28
Today Agenda
Strictly confidential
• Barilla Company Presentation
• Enterprise Risk Management in Barilla
• Strategic Planning & Risk Management: the “hidden” Link
• Risks Disclosure to Top Management, Board and Statutory Auditors
ERM Process
Risk Response &
Control
Reporting
Measurement & Assessment
Monitoring Processes
Action PlanningMitigate, Accept, Transfer, Avoid
Multi – layered reporting on Risks:
‐ Critical
‐ High
‐ Medium & Low
Risk Identification SA session, Incidents, Audit activity & assessement via a uniform method
Matching between Risk Appetite and Risk Profile
Yearly Assertion by Top Management
Culture & Competence
Governance
ERM Strategy
Risk PrioritizationRisk Assertion & Monitoring
29
ERM in Barilla ‐ Risk Register Risk Area Sub Risk Area
EXTERNAL CONTEXT RISKS FINANCIAL RISKSSTRATEGIC RISKS HUMAN CAPITAL &
ORGANIZATIONAL RISKSGOVERNANCE & INTEGRITY RISKS
REPORTING & COMPLIANCE RISKS
Nature of Risk
ICT RISKS
‐ Integrity‐ Access‐ Availability‐ Infrastructure
‐ 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
‐ Competitor‐ Current Markets‐ New Business‐ Retailers‐ Supply Chain‐ New Products/Ingredients
‐ Customer Wants & Evolution‐ Trade Shoppers‐ Current Business‐ New Business
‐ Technological Innovation‐ Product‐ Process/Equipment
‐ Country Instability‐ Political/Government‐ Social‐ Financial
‐ Regulatory Evolution‐ Fiscal & Tax‐ HSE‐ Quality & Foodsafety‐ Labour & Social‐ Other Local Regulations
‐ Macroeconomic Context
‐ Intellectual Properties, Brands & Trademarks‐ Company Brand‐ Meal Solution Brand & Product Naming
‐ Bakery Brand & Product Naming
‐ Raw Materials‐ Technologies Product‐ Technologies Process
‐ Strategic Partnering / Joint Venture‐ Business JV‐ Product Mix‐ Technology‐ GDO
‐ Key Process Outsourcing
‐ Strategic Acquisitions (Investment Evaluation)
‐ Strategic Alignment
‐ Product Portfolio
‐ External Communication & Stakeholders Relations‐ Financial Stakeholders‐ Nutrition / Opinion Leaders / Scientific Communities
‐ Unions‐ Media / External Communities
‐ Other Regulators‐ Customers
‐ Shareholders
‐ 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
‐ Code of Ethics & Code of Conduct
‐ Policies & Procedures‐ Authority / Limit‐ Internal Fraud /Illegal Acts‐ External Fraud / Illegal
Acts
OPERATIONS RISKS
‐ 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
Strictly confidential
‐ 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
31
ERM in Barilla ‐ Risk Rating4 Rating Categories: Low, Medium, High and Critical
FreqSev 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
Strictly confidential
32
ERM in Barilla ‐ Risk Assessment Process
Strictly confidential
Top Management Prioritization
and Weaknesses Evaluation
Barilla Business as Usual
Group Strategic Initiatives
The Enterprise Risk Management Output
33
All identified risk events have been scored according to the Barilla risk assessment methodology
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
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
34
Risk Management Output Disclosure
Strictly confidential
• 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