Risk Profile and Internal Governance
Risk profile
Heineken is a single-product company,
with a high level of commonality in its
worldwide business operations and sys
tems. The resulting consistency, compay-
ability and standardisation has a positive
impact on Heineken's overall risk profile.
However, Heineken operating companies
work in many different environments,
markets and cultures. Heineken's activities
worldwide are exposed to varying degrees
of risk and uncertainty, each of which may
result in a material impact on a particular
operating company but may not materially
affect the group as a whole. Some of these
risks may also cancel one another out
within the group.
In pursuit of further expansion, Heineken
seeks to strike a balance between organic
growth and growth through acquisitions,
within the limits of a conservative financing
policy.
Some of the key risks, as identified by
Heineken, are discussed below.
ReputationaI risk
As the group and its most valuable brand
both carry the same name, the manage
ment of the reputation of the group
and the brand is of utmost importance.
Heineken enjoys a sound corporate
reputation and most, if not all, of our
operating companies are well respected
in their region. Constant management
attention is directed towards enhancing
Heineken's social and environmental
reputation.
A set of standards and regular monitoring
procedures have been put in place or are
being established to achieve this. Further
information can be found in Heineken's
environmental and social report.
The Heineken brand is key to Heineken's
growth strategy. Anything that adversely
affects consumer confidence in the
Heineken brand could have a negative
impact on the overall business. Production
and logistics are subject to rigorous quality
standards and monitoring procedures.
Currency risk
Heineken has operations in over 170 coun
tries and reports in euros. Exchange-rate
movements can have a material impact
on Heineken's financial results, which are
particularly sensitive to the exchange
rate between the euro and the US dollar
and related currencies. Heineken's policy
on hedging exchange risks is explained
on page 66.
Taxation risk
Heineken and its operating companies
are subject to a variety of local excise and
other tax regulations. In principle,
Heineken's sales prices are adjusted to
reflect changes in the rate of excise duty,
but increased rates may have a negative
impact on sales volume.
Internal governance
Internal governance is based on the un
derlying principle of local management's
accountability for managing performance
and the underlying risks, within the
boundaries set by the Executive Board.
Local management is responsible for
implementing, operating and monitoring
an effective internal control system, which
is designed to provide reasonable assur
ance of achieving the business objectives
and prevent or ensure early identification
of potential material errors and losses and
misrepresentation of circumstances.
Policies for the control of worldwide risks
in areas such as marketing, production,
human resources, finance, IT, environ
mental and social responsibility and legal
affairs are in place or are being reviewed.
These elements are part of the reporting
cycle. Heineken is making good progress
with the development and implementation
of uniform group-wide processes and
systems, in order to ensure consistency
and standardisation based on best
practices.
The Executive Board, under the super
vision of the Supervisory Board and more
particularly its Audit Committee, oversees
the effectiveness of internal governance,
including managing risks and monitoring
the effectiveness of internal controls.
Group Internal Audit, together with local
internal audit departments, plays a critical
role in the objective and independent
assessment of business processes and the
effectiveness of internal control.
report of the executive board