Managing risks is a very high priority within FLSmidth
Managing risks effectively and consistently is a collective process in FLSmidth where the common goal is to continuously create higher visibility for the risk management practice and the critical role it plays in protecting our short and long-term business goals from uncertainty.
Risk management framework and process
The Board of Directors has the overall responsibility for deciding the Group’s risk appetite and for monitoring the Group’s risk exposure to ensure consistency between these two. The Board of Directors reviews the Group’s top risks and key mitigation strategies annually.
Through a top-down and bottom-up approach, risks are assessed annually by the Industries, Regions and Group Functions during workshops facilitated by Group Risk Management. This enables collection of a broad spectrum of data across the organisation that identifies the biggest risks for the Group. Further key improvement areas are identified, to which it is ensured that relevant and actionable mitigation plans are in place.
While focus of the annual workshops primarily is on the top risks and opportunities that may have a significant impact on our operating model and financial performance, we further manage the cyclical nature of our business – and the risks associated with this - through our strategic focus on expanding the share of service and aftermarket business and standardised products relative to the share of large capital projects.
Group Executive Management is responsible for the Group’s Risk Management Policy. In addition to participating in the annual top-down risk assessments, Group Executive Management acts as risk sponsors on behalf of the organisation to ensure continued focus on risk management.
The Risk Committee, comprised of the Group CFO, Industry Presidents and Group Risk Manager meet bi-annually to review the top risks and follow up on mitigation plans. This ensures ownership for managing the risks is anchored in the business and that the focus on proactively managing the risks continues throughout the year.
Top Group Risks for 2021
This year’s risk review resulted in the identification of 10 top risks and opportunities that have the potential to significantly impact the entire business and organisation. The top risks - supply chain, cybersecurity, compliance and geopolitical - were all different from 2020.
- Supply chain
- Attracting and retaining employees
- Acquisition integration
- Cement market conditions & Projects