14. Enterprise Risk Management (ERM)
Within the framework of the Enterprise Risk Management Policy, risk assessments are prepared by business units, service units, and corporate functions 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 CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members..
The Executive CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members. is responsible for monitoring the risk assessments for relevance and consistency. The Executive CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members. 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 ethics- and integrity-related as well as antitrust risk issues, providing assurance to the Board of Directors that Management is effectively addressing those issues.
The short- and long-term objectives are set in the fourth quarter of the year. These objectives and threats are subject to scrutiny by the Executive CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members. during meetings with each business unit. Also reviewed and discussed are proposed measures to reduce or contain threats. In that context, responsibilities are assigned. All stakeholders are required to report significant changes to existing identified risks and new threats 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 and sets dates for completion of the measures.
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.
A summary risk assessment is submitted annually to the Executive CommitteeExecutive CommitteeManagement body of joint stock companies; at Clariant the Executive Committee currently comprises four members., the Audit Committee, and the Board of Directors for review. In the case of new or changed risks, reporting is accelerated.
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 and 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) Regulation on the Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) or similar regulations in other countries. The function Global Product Stewardship is responsible for ensuring that all relevant legal requirements are met. Certain specific matters are delegated to other 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 and safe production facilities. ESHA and regional services are responsible for the management of the associated risks.
Examples of emerging risks included in the risk register:
Supply Chain Reliability: The achievement of targets depends on the reliability of the supply chain. The purchase of raw materials may be impaired due to the unavailability of respective products, required energy, or corresponding means of transportation. Similarly, our customers may be affected by the unavailability of certain input materials outside the range of chemical products, limiting their production and, thus, Clariant’s sales opportunities. Clariant responds to these challenges with market intelligence to identify potential constraints at an early stage and in close cooperation with our business partners.
Sustainability transformation: Demand for sustainable products is clearly increasing, which opens up business opportunities. Nonavailability of sustainable offerings represents a market disadvantage.
Clariant is responding with the new organizational unit Group Innovation & Sustainability, which combines various resources to accelerate the sustainability transformation.
Digital interconnection: Successful performance of the Clariant Group depends on properly working information systems. Cyberattacks may result in the loss of business and personal data, knowledge, facilities, or money, leading to interruptions in manufacturing and product deliveries. Such attacks might cause significant economic damages as well as loss of trust. Clariant is responding to the increased cyber risk with a reinforced security operations center, state-of-the-art software, and frequent awareness campaigns and training.