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

Jaarverslagen en Personeelsbladen Heineken

Jaarverslagen | 2003 | | pagina 31