Arla Foods Annual Report 2020
Management Review Our Strategy Our Brands and Commercial Segments Our Responsibility Our Governance
RISK AND COMPLIANCE
MANAGEMENT (CONTINUED)
Our Performance Review Our Consolidated Financial Statements
Our Consolidated Environmental, Social and Governance Data
Risk Owner
Mitigation
Insufficient response to sustainable
production and/or non-compliance with
climate regulations
The EU's climate ambitions cause a potential risk
for Arla as they could lead to restrictions that we
are unable to comply with, thus forcing us to
reduce dairy production or impose significant cost
on Arla or our farmer owners.
: Hanne Søndergaard, Chief Marketing Officer
: As part of our sustainability strategy we introduced
environmental targets approved by the Science
Based Targets Initiative, and we are working hard to
reduce our carbon footprint. Our farmers perform
Climate Checks that provide data for impact analysis
and in 2021, we will continue rolling out the Climate
Checks to our farmers and launch a review of carbon
sequestration to monitor carbon footprint. We will
also watch Farm to Fork strategy development to
secure a prompt reaction to any further regulations.
To read more go to page 34.
Impact:
2020 movement: Stable
Disruptive pace of channel shift due to new
consumer shopping habits (Covid-19 impact)
As more consumers turned to e-commerce grocery
deliveries during Covid-19, the e-commerce space
developed at a pace that would normally be seen over
a 5-year period. We saw bricks and clicks players
increase their e-commerce participation and pure
players attracting new customers as the convenience
of having groceries delivered was maximised during a
period of huge change. The digital commerce sector
has seen a period of rapid innovation as food boxes
from retailers and food aggregator partnerships all
look to respond to the consumer demand of
delivered groceries.
: Peter Giørtz-Carlsen,
Chief Commercial Officer
: In 2020, we continued to build on our
partnerships across the grocery channel to invest
in people and technology, take advantage of the
change in shopping behaviour, and to capitalise on
this growing channel. In 2021, we will continue
adjusting according to the changing consumer
behaviour and look for new growth opportunities
across the e-commerce channel in order to
maintain our leading position within dairy and
secure our position on the digital shelf. This
includes investments in technology across
e-commerce sales and digital marketing as well as
building capabilities across the organisation to
harness the local market strengths. As Covid-19
impacts on the economies of European countries
start to take effect, we see consumers looking for
both value and convenience and the grocery
channel becoming more competitive as retailers
enhance their value proposition for consumers.
Impact:
2020 movement:
Operational risks
Health and Safety risk of business
continuity due to Covid-19
We acknowledge the risk of spreading the virus
among our employees, which besides posing a
health and safety risk for our employees, could
impact Arla's brand reputation as well as business
continuity due to high absence rates.
: Ola Arvidsson, Chief Human Resources Officer
: During 2020, we conducted risk assessments
at all locations and applied adequate measures,
including social distancing, cleaning, working from
home, limitation on travel, etc. to avoid spreading
the virus. In 2021, we will continue with these
measures as required.
Impact:
2020 movement: New
Milk price and volume volatility
(Covid-19 impact)
Milk markets are significantly price volatile, which
European dairy companies and milk farmers have
had to cope with since the liberalisation of the
European milk markets in 2007. Commodity milk
prices quickly reflect global and European demand
and supply balances, and hence small changes in
consumer demand or farmer supply tend to drive
significant price adjustments. Covid-19 has
impacted dairy consumption and caused some
price volatility during 2020.
: Peder Tuborgh, Chief Executive Officer
: In Arla, we constantly monitor commodity
price developments and adjust our business
accordingly. But most importantly we keep front
line focus on our retail and brand portfolio where
we at all times generate the highest value for our
farmers' milk and ensure stable value creation
across the commodity price cycles. Also, in 2020,
we succeeded in growing our branded share of
business. To read more go to page 54-62.
Impact:
2020 movement:
Information security and cyber-attack
(Covid-19 impact)
Increasing significance of e-commerce and a shift
in working patterns caused by Covid-19 elevate
the risk of major cyber-attacks even further,
potentially resulting in inability to manufacture, sell
or ship products when integrated finance, logistics
or office support systems are disrupted..
: Torben Dahl Nyholm, Chief Financial Officer
: In 2020, we ran a broad project to enable
periodic security vulnerability scanning. The core
network perimeter was strengthened with firewalls,
the latest threat prevention and security technologies.
We implemented a security education platform to
educate users on cyber-risk, as well as to test and
build their awareness through simulated phishing
campaigns. In 2021, we will continue to remediate
security vulnerabilities identified during scans in
2020. We will further improve our threat detection
and prevention capabilities, including cloud,
network, e-mail and endpoint protection
technologies. In addition, enhanced education
curriculum targeted to high-risk functions will
be applied.
Impact:
2020 movement: Stable
Financial risks
Currency fluctuation
As 58 per cent of Arla's revenue is generated in
currencies other than EUR or DKK, our key financial
risk relates to the fluctuation of currencies in our
global markets.
52 ARLA FOODS ANNUAL REPORT 2020View entire presentation