50. Risk management of operations. An exception is the supply of beer products from the Netherlands to the USA, one of Heineken's most profitable markets. Contingency measures, involving multi-sourcing locations in Europe are in place, and Heineken's central purchasing department manages long-term contracts with preferred suppliers in order to secure supply of critical raw and packaging materials. Monitoring business continuity risks will be further structured in 2006. IT security Heineken's worldwide operations are increasingly relying on information systems. Heineken has a strict IT security policy to ensure confidentiality, integrity and availability of information. Tools are used to support compliance with that policy and compliance monitoring is applied. A more structured IT auditing approach will be implemented in 2006. Financial risks Currency risks Heineken operates internationally and reports in Euros. Currency fluctuations, especially relating to the US dollar, could materially affect overall Company results. Heineken has a clear policy on hedging transactional exchange risks, which postpones the impact on financial results. Translation exchange risks are not hedged. The sensitivity on the financial results with regard to currency risks are explained on page 98. Capital availability and liquidity risks There could be insufficient capital generated in order to finance the long-term growth. Regulatory risks Tax Heineken and its operating companies are subject to a variety of local excise and other tax regulations. If the beer excise would be averaged in the European Union, a significant increase of excise may be the result in various European markets. 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. Increasing legislation Due to increasing legislation there is an increased possibility of non-compliance. Additionally, more supervision by regulators and the growing claim culture may potentially increase the impact of non-compliance, both financially and on the reputation of the Company. As from 2005, every half year all majority-owned companies formally report litigations to Group Legal Affairs. The information includes outstanding litigations, details about lawsuits, and the risk and extent of potential claims in order to determine the amounts to be provided. There may be current risks that the Company has not fully assessed, and are currently identified as not having a significant impact on the business but which could - in a later stage - develop a material impact on the Company's business. The Company's risk management systems are focused on timely discovery of such incidents. Sufficient access to capital is ensured to finance long-term growth and to keep pace with the consolidation of the global beer market. Financing strategies are under continuous evaluation. Strong cost and cash management and strong controls over investment proposals are in place to ensure effective and efficient allocation of financial resources. Heineken N.V. - Annual Report 2005

Jaarverslagen en Personeelsbladen Heineken

Jaarverslagen | 2005 | | pagina 56