Investor Presentaiton

34 A.P. Moller-Maersk Annual Report 2020 Risk description 2021 Risk assessment Customer service level Directors' Report Our business Risk management 2 Technology roadmap 3 Cyber-attack 4 Ocean industry collapse 5 People safety and security = A.P. Moller Maersk's strategy to become a global integrator of con- tainer logistics hinges on the ability to deliver a superior service level to cus- tomers. A.P. Moller - Maersk needs to deliver operationally on the service level promised to customers in order to build long-term trust and brand reliability. A.P. Moller Maersk's growth strategy is dependent on its ability to trans- form its digital foundation. If there is serious delay or failure to modern- ise technology, execute the Technology roadmap, and standardise core busi- ness processes, there is a risk that Maersk is unable to orchestrate value and stable revenue streams via its technology platforms. As A.P. Moller - Maersk becomes increasingly digitalised, more devices and control systems are connected online resulting in a wider technology surface across the Information Tech- nology and Operational Technology infrastructure, which could be compro- mised. Should a successful cyberattack materialise, operational disruption and/ or data breaches may occur. Although there have been signs of structural improvements in the Ocean segment, there is still a non-negligible risk that the Ocean industry could again become financially challenged in another downturn cycle. The business of A.P. Moller-Maersk requires many of the employees and other external contractors to work in high-risk locations both in terms of frontline operations as well as in terms of working in geographical areas with elevated risk. The delivery promise introduced as part of the integrator strategy is key to building customer trust and thereby retaining strong brand reputation of A.P. Moller-Maersk. Not being able to deliver operationally can weaken the foundation of the A.P. Moller - Maersk global integrator strategy. A.P. Moller Maersk has made pro- gress on its technology roadmap and standardisation of its core busi- ness processes. However, since A.P. Moller Maersk is expanding into new business areas, the busi- ness processes and workflows are complex, and the current IT land- scape is fragmented, it is likely that A.P. Moller Maersk will see some delays, as it progresses the road map. Following the cyberattack in 2017 sev- eral measures to improve cyber security have been implemented. However, as the external threat continues to develop, a cyberattack could still occur leading to financial losses, loss of customer confidence, reputational damage, regulatory sanctions for data breaches, and/or operational accidents. Another downturn of the Ocean indus- try over the coming years could become a distraction to A.P. Moller - Maersk's strategy execution and hamper its ability to invest. If the risk materialises, A.P. Moller-Maersk may be forced to focus on improving its short-term financial performance. A.P. Moller Maersk has over the years continued to have accidents, some of which have unfortunately had very serious and even fatal outcomes. This not only causes business disruption and affects A.P. Moller-Maersk's name and reputation, but more importantly brings into focus the duty of care towards people. Mitigation strategies A.P. Moller Maersk is permanently improving its business processes and systems to deliver on the new delivery promises. In addition, the service levels are continuously monitored for swift actions to mitigate adverse develop- ments, and business continuity strat- egies are designed and rolled out to withstand operational disruptions. A.P. Moller Maersk has prioritised technology modernisation, stand- ardisation of core business processes and development of data as a differ- entiating asset. To achieve the right customer and business outcomes, A.P. Moller Maersk is transforming the engagement model between Tech- nology and business platform owners to drive greater cross functional col- laboration and accountability. Current mitigation includes a cyber security programme, business continuity plans, and cyber-risk insurance. The initial three-year cyber security program was completed in 2020. The next phase to further mitigate the threat associated with the enhanced digital interface with customers is already underway. A.P. Moller-Maersk has limited levers to impact the overall demand for container shipping. However, multiple mitigation strategies exist, such as closely monitoring supply and demand, de-commoditising products and ser- vices, focus on cost leadership, and growing Logistics & Services to reduce the exposure to Ocean volatility. A new Safety & Resilience function has been established to combine knowledge and expertise in this area, have a unified strategy around the topic, embed the strategy through a leader-led approach across the organisation and through manage- ment of critical risks.

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