Arla Foods Consolidated Annual Report 2021
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Arla Foods Consolidated Annual Report 2021 / Risk and Compliance / Risk management
RISK MANAGEMENT
As a cooperative with cross-country ownership and global activities, Arla faces multiple risks and uncertainties that may threaten our
ability to pay a competitive milk price to our owners and deliver the aspirations of our new strategy, Future26. Steering through 2021
with increasing demand from consumers for sustainably produced dairy products as well as upcoming climate-related regulations and
requirements exemplifies why strong risk and compliance management is important.
Risk management
Arla's risk and compliance management aims to
effectively identify, assess and reduce risks and
uncertainties, mitigate adverse internal and external
impacts, capture business opportunities to maximise
value creation, and to ensure a compliant business
conduct. Our focus is on external risks that may
threaten the realisation of our strategy, and we also
address risks inherent in the business processes of
the company.
The Board of Directors has the overall responsibility
for overseeing risk and for maintaining robust risk
and compliance management as well as an internal
control system. The Board of Directors recognises
the importance of identifying and actively monitor-
ing the most persistent risks, as well as long-term
trends and challenges facing the Group.
The most significant risks are regularly reviewed
and assessed by the Executive Management Team
and the Board of Directors, who are also responsible
for reviewing the effectiveness of the risk and
compliance management and internal control
processes throughout the year. Generally, our
risk and compliance activities are monitored and
discussed quarterly by the Executive Management
Team and annually by the Board of Directors. In
2021, the Board of Directors, as part of the Future26
strategy development, discussed opportunities
and risks related to transformation of consumer
behaviour, impact of EU environmental and climate
regulations, and disruptive pace of change enabled
by technology, such as e-commerce.
Risk identification
We identify risks using several methods, including
monitoring of regulatory developments, investiga-
tions upon alleged misconduct reports, compliance
training, internal compliance reviews and process risk
mapping, as well as CSR due diligence.
Key changes in Arla's risk position
in 2021
•
.
•
Major global trends largely continued from 2020,
with accelerated uncertainty around the
economic landscape.
Disruptive pace of change in consumer trends
accelerated due to Covid-19. We responded to
that challenge in our new strategy, Future 26, by
defining how we are going to build our growth
platforms.
The likelihood of the EU issuing stricter environ-
mental regulations has increased. This risk is also
addressed as part of our new strategy, Future26,
embedded within 'Lead sustainable diary' pillar.
• Risk of cyber crimes increased during 2021,
therefore it was high on Arla's agenda.
☑To read more about Future26 go to page 11.
TYPES OF RISK
We differentiate risks by their potential
impact. Impact indicates the level of
monetary and/or reputational loss. In this
report, we focus on critical and major risks,
but in our internal risk management we also
track and mitigate risks below these
materiality levels.
Major: Long term impairment of market
position and/or national media coverage
resulting in damage to brands/image and/
or monetary loss 10-50 EURm.
Critical: Permanent reduction of brand
value and/or extensive international media
coverage damaging the image of Arla and/
or monetary loss in excess of 50 EURm.
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