Under the Enterprise Risk Management Policy, based on the standard of »The Institute of Risk Management«, risk assessments are prepared by Business Units, Service Units, Corporate Functions, and Regions to assess threats that will impact the achievement of the objectives set for Clariant overall. These objectives are a result of the overall strategy of the Group as set by the Board of Directors and implemented by the Executive Committee.

The Executive Committee is responsible for monitoring the risk assessments for relevance and consistency. The Executive Committee has formed an »Ethics and Risk Management« subcommittee, which maintains an up-to-date understanding of areas where Clariant is, or may be, exposed to risk issues, and seeks to ensure that management is effectively addressing those issues. The Ethics and Risk Management Committee meets on a quarterly basis.

The short- and long-term objectives are set in the fourth quarter of the year. These objectives, threats, and opportunities are subject to scrutiny by the Executive Committee during meetings with each Business Unit. Also reviewed and discussed are proposed measures to reduce or contain threats. In that context, mitigation measures are defined, and responsibilities are assigned. All stakeholders are required to report significant changes to existing identified risks and new threats and opportunities as they arise.

Risk registers are maintained using financial and reputational impact and probability assessments to score and rank all identified risks. The assessment also addresses the measures in place to manage the risk identified with dates for completion of the measures. Effectiveness of the measures is also assessed.

When threats have been identified and quantified, they are delegated to qualified individuals who are required to deliver effective risk management. Depending on the nature of the risk identified, specific skill sets may be required for the management of those particular risks. The assessments are shared between the stakeholders on a regular basis.

A consolidated risk assessment is submitted annually to the Executive Committee, the Audit Committee, and the Board of Directors for review. In case of new or changed risks, reporting is accelerated.

Summaries of risk assessments from the Business Units, Regions, and Service Units are shared with key managers of Clariant.

To support functional responsibility, certain functions have access to risk assessments to assist them in their roles. Examples of such functions are Environmental Safety & Health Affairs (ESHA) to identify key sites for their property risk survey program or Group Procurement to ensure reliable and compliant supply of raw materials.

Examples of identified risks included in the risk register:

Regulation and compliance: Clariant is subject to many rules and regulations as well as compliance standards. These include chemical industry, country, government, and customer requirements as well as the European Union’s (EU) Regulations on Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) or similar regulations in other countries. Clariant Product Stewardship is responsible to ensure that all relevant legal requirements are met. Certain specific matters are delegated to Legal, ESHA, and logistics functions.

Sites and locations: This includes manufacturing plants and equipment important for the production of Clariant products for sale to customers. Also addressed are country and culture issues that could create threats to and opportunities for business objectives. The aim is to maintain high-quality production facilities. ESHA and Regional Services are responsible for the management of the associated risks.

Examples of emerging risks included in the risk register:

Economic development: The achievement of corporate targets depends on economic development, which is therefore continuously monitored in all markets. Should a market not develop in line with expectations, the organization will be adjusted accordingly. The global trade uncertainty arising from the currently looming conflicts around trade and tariffs could adversely affect economic development.

Consolidation of customers: Consolidations in certain markets of Clariant result in increasing pressure on prices. As a consequence, Clariant is further developing key account pricing strategies and speeding up the value proposition claim.