RISK MANAGEMENT · 2016. 1. 17. · Input Output Consistent assessment of R&O Consolidated profile Group-level perspective Raise major Group-level R&O Top-Level R&O Assessments (mandatory,

VII JORNADA ANUAL DE RIESGOSVII JORNADA ANUAL DE RIESGOSMadrid Madrid –– 25 January 200725 January 2007

Integrated Risk Management StrategyCurrent Status

Enterprise

Enterprise

RISKMANAGEMENT

Finance & ControlMarc Schaedeli / Head of Risk Management

Group Risk Services

Integrated Risk Management Strategy

2Finance & Control

Why do we have an integrated approach to risk management?

• It brings direct benefits to the business Experience and feedback within Nestlé shows– a high level of satisfaction with the immediate benefits– a growing demand

• It has the potential to provide competitive advantage• It is an impending legal requirement in Switzerland

Group Risk Services


3Finance & Control

The Growing Influence of Enterprise Risk Management (ERM)

Positivelydisposed

Preparing/Developing/Implementing

9%

35% 56%

Have rejected

A majority of companies are choosing ERM…

…and ERM is seen as an increasinglyimportant responsibility

50%

46%

39%

29%

30%

38%

29%

36%

19%

16%

32%

35%

Internal Audit

CFO

CEO

Board

Very high Significant Somewhat or lessDegree of Importance

Source: The Conference Board 'From Risk Management To Risk Strategy' (Results from survey of 271 executives)

'Advanced ERM' companies experience significantly greater benefits than those still adopting an ad-hoc approach. Improved benefits have been seen in each of the following areas:

• Better-informed decisions

• Greater management consensus

• Increased management accountability

• Smoother governance practices

• Ability to meet strategic goals

• Better communication to the board

• Reduced earnings volatility

• Increased profitability

• Use of risk as competitive tool

• Accurate risk-adjusted pricing

Clear benefits from an 'integrated' approach to ERM

Group Risk Services


4Finance & Control

ERM Process

Output

• •

•

•

•

•

•

• •

•

• •

• • •

negligible

Increasing RiskIncreasing Opportunity

Incr

easi

ng L

ikel

ihoo

d

A

B

C

D

E

F

moderate significant catastrophicnegligiblemoderatesignificantexceptional

• Identify risks to objectives and opportunities to exploit for competitive advantage

• Quantify impact and likelihood of occurrence• Prioritise actions to mitigate/avoid risks

and exploit/enhance opportunities• Support decision-making in the management process• Ultimately optimise allocation of resources

Current Application of the ERM Process

• Annual top-down risk assessments of Zones and Globally Managed Businesses

• Global Business Strategies (GBS)• M&A and divestiture projects• Major capital spending and restructuring projects

...and in other areas upon request*as defined by the Executive Board (Nov. 2002/Aug. 2006)

The process is mainly applied in the following areas*:

• Simple, flexible self-assessment process• Multi-functional team, typically in a workshop environment• Risks owned by line management• Challenges existing mindset• Requires no additional resources• Integrated into project/business management• Risk Management Advisors facilitate and are responsible

for methodology

It is a structured approach to:

It is applied in a practical way:

7. Action(ongoing)

6. Decision

5. Reporting(Moderator)

4. Evaluation(Team)

3. Description(Moderator)

2. Brain-storming

(Team)

1. Goals &Objectives

8. Monitoring(ongoing)

NestléRisk & Opportunity(R&O) Assessment

7. Action(ongoing)

6. Decision6. Decision



4. Evaluation(Team)

4. Evaluation(Team)



2. Brain-storming

(Team)

2. Brain-storming

(Team)

1. Goals &Objectives1. Goals &Objectives




Group Risk Services


5Finance & Control

Overview of ERM ActivityApplication of ERM process since December 2004

1

02

≥ 3Number of Assessments

Innovation & Renovation Projects:Coffee, Confectionery, Culinary,Ice Cream, Nutrition, NPPC

Markets:Z-AMS (Brazil, Chile, Ecuador, Mexico, Central America, Cuba)Z-AOA (India)Z-EUR (Germany)

Business:PowerBar, CPW, Nestlé Waters, Nespresso, NITR

Legal/IP:Russia, Nespresso

ERM at Zones / Globally Managed Businesses level:Value driver 2006, Z-AMS Target 2006

ERM at Alcon:General Management, Europe, LACAR, Spain, France, UK, Nordic, Belgium, Germany, Italy and Tax, Treasury, R&D, HR

M&A: Ice-Cream

Supply Chain:RATES project with

further embedment in Quality, Purchasing,

Industrial Performance, Engineering, Regulatory

Engineering: New factory projects

in Russia (NestléWaters, NPPE)

R&D/PTC:All PTC/R&D

except St. Louis and Vittel

Group Risk Services


6Finance & Control

Foundation to Support an Integrated Approach

Single repository for R&O information

R&O Management Information Repository (ARM)Secure and wed-based, providing transparency and real-time updates

Facilitates sharing of knowledge and avoids duplication of efforts

Documented Best Practices and GuidelinesR&O Assessment Best Practice

R&O Management Terminology / ClassificationARM User Guidelines

‘R&O Champions' in selected markets

Input Output

Consistent assessment of R&O

Consolidated profile

Group-level perspective

Raise major Group-level R&O

Top-Level R&O Assessments(mandatory, Zone & Globally Managed Business)

Bottom-up R&O Assessments(on management request, ad-hoc)

Nestlé Audit Group Findings(NAG guidelines, R&O classification)

Compliance Framework

Regular reportsto EBM

(work in progress)

Collectively address all sources of main R&O

to Nestlé S.A.Strategic, Operational, Reporting,

Financial, Compliance

Group Risk Services


Finance & Control

• Mandatory annual Zone/Globally Managed Business (GMB) assessment(major R&O impacting on targets)

– Workshop involving direct reports, timing: October / November– Support provided by Group Risk Management (FC-GRS)– Outcome challenged and validated by Head of Zones / GMB

• ‘Ad-hoc’ assessments (on request):– Provide support for business, project ‘ad-hoc’ assessments

Furthermore we have agreed to work hand-in-hand with:• Group Control:

– To improve R&O management within strategy setting– To embed simple process within Strategic Planning (GBS) to identify major strategic R&O– Pilot studies already performed

• GMB (Nestlé Nutrition):– Embed R&O Management within Top Nestlé Nutrition I&R projects, operational R&O

• R&D/PTC:– Build upon ‘ad-hoc’ R&O assessment already performed in Coffee, Confectionery, Culinary, Ice

Cream, NPPC to develop common I&R project R&O catalog– Embed R&O Management within Top I&R projects (all product categories)

Where is the ERM process applied at Nestlé…? Status – December 2006

Group Risk Services


Finance & Control

- Single production center - Prototype lines - Maximum capacity utilization - Single distributor- Single key suppliers

Nespresso risk characteristics

Group Risk Services


Finance & Control

ERM Process

7. Action(ongoing)

6. Decision


4. Evaluation(Team)


2. Brain-storming

(Team)




Group Risk Services


Finance & Control


Step 1: Goals & Objectives

Key Supplier 3PL (former PESA)Operation

Supply

Supplier Production Center Distributor

Delivery

Logistics

ConstructionTransfer

Other Suppliers

Scope of the assessment defined:Production Centre operation

Group Risk Services


Finance & Control

Management

Logistics Factory Operation

External Threats

Raw & Pack Mat

Quality

Supply ChainProduction

IT & Systems

HR

Engineering

Operational Health & Safety

Finance & Controlling

External Exposure

Natural Hazards

Environmental Impact

Delivery to 3PL

Steps 2-3: Brainstorming and Description

3. Description

2. Brain-storming

Team: Simple, flexible and multifunctionalSupported by Group Risk Services, Nestec

Group Risk Services


Finance & Control

Steps 4-5: Evaluation and Reporting

4. Evaluation

5. Reporting

All areas covered120 risk scenarios evaluated Impact/Likelihood assessed

Tolerable risk level defined

Impact

Prob

abili

ty /

Freq

uenc

y

5272

5273

5274

5275

5276

5277

5278

5279

5280

5281

5282

5283

5284

5285

52865287

5288

5289

5290

52915292

5293 52945295

5296

5297

5298

5299

5300

5301

5302

5303

5304

5305

5306

5307

5308

5309

5310

5311

5312

5313

5314

5315

5316

5317

5318

5319

5320

5321 5322

5323

5324

5325

5326 5327

5328

5329

5330

5331

5332

5333

5334 5335

5336

5337

5338

5339

5340

F A

lmos

t E

Unl

ikel

yD

Fai

rly L

C P

roba

bB

Hig

hly

A A

lmos

t

-4 Exceptional -3 Significant -2 Moderate -1 Negligible 1 Negligible 2 Moderate 3 Significant 4 Catastrophic||||

Group Risk Services


Finance & Control

Step 6: Decision

6. Decision

““firefire””: A scenario clearly above our risk appetite!: A scenario clearly above our risk appetite!

-70% of Nestlé’s large property losses

Group Risk Services


Finance & Control

Steps 7&8: Improvement and Monitoring

Measures• Clear rules and training• Procedures (hot work permit)• Audits• Roasters safety checks• Smoke detection system installed• Sprinkler system in place• …

8. Monitoring

7. ImprovementWho, what, by when…

Group Risk Services


Finance & Control

Our BCM strategy

• Ensure the safety of our staff

• Maximise the defence of Nestlé Nespresso S.A reputation and brand image

• Minimise impact of business interruption events on our consumers (the Gap)

• Limit/prevent impact beyond our company’s boundaries

• Demonstrate effective and efficient governance to the media, markets and stakeholders

• Protect Nestlé Nespresso S.A assets

• Meet insurance, legal and regulatory requirements

Group Risk Services


Finance & Control

Thank you very muchThank you for your attention

And enjoy 5 minutes of pleasure…

www.nespresso.com

Documents

RISK MANAGEMENT · 2016. 1. 17. · Input Output Consistent assessment of R&O Consolidated profile Group-level perspective Raise major Group-level R&O Top-Level R&O Assessments (mandatory,