Arla Foods Annual Report 2020

Management Review Our Strategy Our Brands and Commercial Segments Our Responsibility Our Governance Our Performance Review Our Consolidated Financial Statements Our Consolidated Environmental, Social and Governance Data RISK AND COMPLIANCE MANAGEMENT (CONTINUED) : Torben Dahl Nyholm, Chief Financial Officer : We have centralised foreign currency exposure management in place, and we reduce our short-term transactional exposure through hedging activities in our main currencies. Impact: 2020 movement: Stable Legal and regulatory risks Major product quality and/or safety issues resulting in product recall Food safety and compliance with health and safety regulations is a top priority across our supply chain and commercial business. It is also part of our social responsibility commitments stated in our Code of Conduct. Major product quality and/or food safety deviation may lead to a brand reputation risk and lack of trust in our products from Arla customers and consumers. Furthermore, downgrade of products may lead to financial losses. : David Boulanger, Chief Supply Chain Officer : We constantly improve and extend our quality assurance programme. We have quality and food safety management programmes in place driven from a central QEHS department, and we monitor our core production performance indicators monthly. In 2021, we will focus on further implementation of Arla QEHS Manual and Arla Food Safety Mandatory standards, as well as obtaining food safety certification from a third party certifying body and further auditing against customer requirements. Impact: 2020 movement: Stable Legal non-compliance, corruption, fraud and unethical business conduct Any instance of corruption or unethical business conduct raises risk of reputational damage, fines and criminal prosecution. Across all core business processes an inherent risk of misconduct exists and needs mitigation. For example, we need to ensure competition law compliance in all areas, markets and functions. This requires that we act in accordance with the legislation when entering into agreements with suppliers and customers. Competition law infringements are subject to significant regulatory fines but also entails a risk of material damage to our reputation. We must also secure the privacy of our employees', customers' and other business partners' personal data in line with GDPR. Actual or perceived violations of GDPR or other data privacy and system security regulations could raise a risk of significant regulatory fines and reputation damage. : Torben Dahl Nyholm, Chief Financial Officer : We have zero tolerance for misconduct which may compromise our reputation or corporate integrity. We constantly educate our employees on the principles of our Code of Conduct and internal policies, e.g. anti-harassment, anti-bribery, fraud, and third party entertainment policy. We monitor any misconduct through a system of internal controls in all business processes, and we identify irregularities through reporting structures, including a group-wide whistle-blower programme. We have taken significant steps to ensure competition law compliance. The messaging from top management is unambiguous, and it is communicated on a regular basis to relevant employees in markets where we are present. Most of these sessions are carried out as mandatory face-to-face training sessions. Additionally, we have an extensive written compliance programme as well as a regularly updated competition law policy. E-learning is also available to all colleagues worldwide. We review our business processes and IT systems and strengthen our internal policies and procedures annually. We implemented a control framework, which is supported by continuous education of employees and audits of relevant business partners. We have also improved our HR processes, policies and procedures to ensure data privacy of employees. To read more go to page 49-50. Impact: 2020 movement: Stable 53 ARLA FOODS ANNUAL REPORT 2020 Risk Owner Mitigation

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