46 Report of the Executive Board
Risk management continued
one of Heineken's most profitable markets.
Securing supply of fast-growing innovations like
DraughtKeg is also considered critical, since we
also depend on partnerships. Monitoring supply
continuity risks was further structured in 2007,
but requires embedding. Securing timely supply
|of raw and packaging materials is strongly
coordinated by our central purchasing discipline.
In 2007, the production infrastructure in
Western Europe was evaluated. This resulted in
strengthened central coordination with respect
to production allocation and a corresponding
realignment of our investment strategy.
IT security
Heineken's worldwide operations are increasingly
reliant on information systems. Heineken has
a strict IT security policy to ensure confidentiality,
integrity and availability of information. In 2007
compliance monitoring was further structured
by self-assessments and audits. The progressive
centralisation of IT systems and infrastructure has
a positive impact on ensuring IT security measures.
Financial risks
Currency risk
Heineken operates internationally and reports
in euros, which has proved to be a very strong
currency over the past few years. Currency
fluctuations, relating to the US dollar in particular
could materially affect overall Company results,
considering the size of export from the Euro-zone
to mainly the US.
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 117.
Capital availability
There could be insufficient capital generated
in order to finance long-term growth. 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.
Regulatory risks
Tax
Heineken and its operating companies are
subject to a variety of local excise and other tax
regulations. The EU Council did not adopt the
Commission proposal to adapt the minimum
excise rate for beer with the rate of inflation. This
adjustment would have lead to increases in some
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.
Litigation
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. Every half year all majority-owned
companies formally report outstanding claims
and litigations against the Company in excess
of €1 million to Group Legal Affairs, including
an assessment of the amounts to be provided for.
There may be current risks 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
a re focused on timely discovery of such risks.
Heineken N.V. Annual Report 2007
