Risk and Crisis Management
Clariant has developed a systematic approach to analyzing and managing risks and crises. It includes the goal of achieving resiliency as well as measures concerning the business modelBusiness ModelThe business model illustrates how a company draws on various capitals as inputs and converts them into outputs, such as products and services, through its business activities. The company’s activities and outputs lead to outcomes that affect the capitals, thus impacting the company and its stakeholders. and the protection of Clariant’s production assets against financial and non-financial risks, such as cyber risks or physical, regulatory, or market risks related to climate change. After the pandemic, the world in 2022 continued to be unpredictable, marked by political instabilities resulting from the war on Ukraine. At the same time, global risks, such as climate change and digital disruption, have further accelerated. With its effective and strong enterprise risk management, Clariant ensures quick adaptation to a fast-changing environment, provides for protection, and fosters its ability to meet stakeholders’ changing needs.
Clariant’s regular risk assessments are based on a company-wide approach. They integrate sustainability and consider any threat that might impact the achievement of the company’s financial and non-financial strategic objectives. Within the framework of the Enterprise Risk Management Policy, risk assessments are prepared by business units, service units, and corporate functions. Annual summary risk assessments are submitted to the Executive Steering CommitteeExecutive Steering CommitteeThe Executive Steering Committee (ESC) is authorized by the Board of Directors to steer the company. It has overall strategic and financial responsibility, including for our profit and loss statement. The ESC consists of the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), and the three Business Presidents., the Audit Committee, and the Board of Directors for review. In the case of new or changed risks, internal reporting is accelerated. In 2022, the focus was on managing the impacts of the war on Ukraine on personnel, complianceComplianceCompliance is a key element of Corporate Governance. It refers to compliance with the law and directives as well as with company codes and ethical business practices and behaviors. with international standards, and business continuity.
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 its property risk survey program, and Group Procurement, to ensure reliable and compliant supply of raw materials.
At Clariant, the terms »crisis management« and »emergency management« are used synonymously. Concerning emergency management, Clariant Corporate Guidelines 08 (EHS Reporting) and 15 (Emergency Management) set the framework for emergency reporting and the organization of emergency management. ComplianceComplianceCompliance is a key element of Corporate Governance. It refers to compliance with the law and directives as well as with company codes and ethical business practices and behaviors. with the emergency guidelines is the responsibility of the head of Emergency Management. Emergency management teams are established at every site and in each country and region. The Group Emergency Management (GEM) team is responsible for crisis/emergency management at the Group level. This team is supplemented by extended functions such as IT, Legal, Procurement, Communications, and Product Safety. Annual scenario trainings are mandatory for all emergency management teams throughout Clariant.
Effective Enterprise Risk Management
Enterprise Risk Management (ERM) comprises the identification, management, mitigation, measuring, monitoring, and prevention of risks. The Executive Steering CommitteeExecutive Steering CommitteeThe Executive Steering Committee (ESC) is authorized by the Board of Directors to steer the company. It has overall strategic and financial responsibility, including for our profit and loss statement. The ESC consists of the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), and the three Business Presidents. is responsible for monitoring the risk assessments for relevance and consistency. It 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 related to Ethics and Integrity as well as Antitrust. The assessment and management of climaterelated risks and opportunities are monitored by the Board of Directors’ Innovation & Sustainability Committee, which was formed in April 2021.
Potential threats are documented in risk registers, quantified, and delegated to qualified individuals and teams with specific skills for the management of the respective risk. Documentation in the risk registers uses financial and reputational impact and probability assessments to score and rank the risks. The assessments also address measures to manage the risks and set dates for completion of the measures.
Active emergency management
During the pandemic, Clariant´s approach to crisis management with the key priority of protecting the health of all employees has proven to be efficient, including the specific policies such as how to reduce the risk of infection at sites and how to manage visitors or contractors. In 2022, active emergency management focused on preparing for worst-case cyber or ransomware attacks. A new alerting and collaboration tool was purchased. It is located outside the Clariant network and allows communication and collaboration in the event of the standard Clariant communications tools being unavailable. Another significant challenge in 2022 was the management of the impact of the war on Ukraine. Elements included the duty of care to employees both in Ukraine and Russia, complianceComplianceCompliance is a key element of Corporate Governance. It refers to compliance with the law and directives as well as with company codes and ethical business practices and behaviors. with international sanctions, and ensuring business continuity in other countries.
Resiliency and the recognition of opportunities
The overall goal is to continuously integrate ESG risks and opportunities into Clariant´s long-term strategy. A strong risk culture is essential to support and maintain Clariant´s operational resiliency in a fast-changing environment. In particular, Clariant recognizes the need to evaluate climate impact and enhances climate risk assessments. Acknowledging dependencies and interconnections may result in a better alignment and understanding of risks from all parts of the business and eventually help in recognizing the opportunities as well.
Supply chain reliability: The achievement of targets also depends on the reliability of the supply chain. Raw material purchasing may be impaired due to the unavailability of respective products, required energy, or corresponding means of transportation. Similarly, Clariant’s 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 and monitoring to identify potential constraints at an early stage and in close cooperation with business partners. The Standardized Operating Procedures for Supplier Sustainability, ComplianceComplianceCompliance is a key element of Corporate Governance. It refers to compliance with the law and directives as well as with company codes and ethical business practices and behaviors., and the Risk Assessment Process, updated in July 2022, refer to the details regarding supplier sustainability assessments and audits. Read more in the chapter Supply Chain Resiliency.
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.
Sustainability transformation: Demand for sustainable products is clearly increasing, which opens up business opportunities. Unavailability of sustainable offerings represents a market disadvantage. Clariant is responding with the service unit Group Innovation & Sustainability, which combines Sustainability, Innovation, ESHA, and other competencies coming together in one department to accelerate the sustainability transformation.
External reporting and transparency
Believing in reporting as a mechanism for more awareness and accountability, Clariant will continue to improve transparency and the disclosures as risk profiles expand. Clariant aims to increase transparency by further quantifying the risks, for example, with respect to climate. Clariant voluntarily uses and references the following standards and frameworks in its holistic approach:
- GRI Standards 2021
- SASB Standards (Chemicals)
- TCFD Disclosures
- International <IR> Framework, Part 2, 4D