Risk Management and Control System (continued) 46 Annual Report 2009 - Heineken N.V. Company reputation, brand image and revenue could be impacted by product integrity issues. Therefore, the whole supply chain of all Heineken Operating Companies are subjected to high quality standards and intensive monitoring procedures to secure product integrity in accordance with international certifying bodies. Starting in 2010, Heineken will begin the roll out of a reputation survey with critical stakeholders at both a global and national level. This will further mitigate reputational risk and provide a clearer view of the Company's reputation. A Code of Business Conduct and Whistle-blowing Procedure aim to prevent any unethical and irresponsible behaviour of the Company or its employees. During the year under review, a new practical crisis manual was developed and distributed throughout the business. Alongside this, a simulation workshop is being rolled out throughout the business. All Heineken Operating Companies are required to complete this workshop and undertake a 'refresher' exercise at least once every two years. The Company also invests considerable resource in activities that drive sustainability and support the Company reputation. Heineken's Sustainability Report outlines Heineken's priorities, goals and achievements in these areas. The report can be viewed on www.heinekeninternational.com. Pressure on alcohol An increasingly negative perception in society towards alcohol and more specifically alcohol abuse could prompt legislators to take restrictive measures including restrictions, on such things as commercial freedom and increased government tax. This perception is fed by critical coverage in the media. Further restrictions of our commercial freedom to promote and sell our products could lead to a decrease in brand equity and potentially in sales and damage the industry in general. Heineken actively participates in the EU Forum on Alcohol and Health and delivered its commitments in the area of consumer information, alcohol consumption at the workplace and commercial communication. In 2009, Heineken continued to work on establishing effective self-regulation in the EU together with the Brewers of Europe. We also filed our multi-market campaign "Know the signs" at the EU Forum. Our internal programmes Cool@Work and Responsible Commercial Communication, which are being monitored continuously, remain important building blocks of our policy. Heineken is also actively engaged in the process of the World Health Organisation in developing a global strategy on alcohol-related harm. We have reached out in markets to inform governments on what a global strategy should look like. Rather than proposing 'a one size fits all strategy' globally, we support evidence-based and tailor-made policies that truly help to reduce alcohol-related harm. Furthermore, we explain to governments that the alcohol industry has a role to play in helping to reduce alcohol-related harm. Attractiveness of beer category under pressure Heineken has many operations in mature beer markets where the attractiveness of the beer category is being challenged by other beverage categories. Consumers may also change behaviour following the rise of discount brands and retailers following the recession. In these markets, especially, the on-trade channel is under pressure, which makes adjustments to the cost base unavoidable. Heineken is relatively highly geared to mature markets since their acquisition of Scottish Newcastle. Management focus is on product innovation, portfolio management and cost- effectiveness in order to secure market position and profitability. Volatility of input costs Pricing strategies are top priority in all of our markets. This includes assessments of customer, consumer and competitor responses based on different pricing scenarios, which will have different outcomes market by market. In principle, we will pass on increased input costs impacting volume. During the second half of 2008, commodity markets rapidly declined following the world economic climate and remained depressed for most of 2009. In addition, the run of several years' poor harvests in key grain and hop markets has reversed and world grain stocks are recovering. Group Purchasing ensures Heineken's scale is leveraged by making use of flexibility in contracts and active hedging. This brings economies of scale, minimises the impact of increases in input costs, and maximises the opportunities for cost reductions and other commercial terms. In 2009, a total of 83 per cent of input costs were covered via Group managed contracts. In previous years, our hedging strategy provided an effective shield against peak prices and similar strategies are now ensuring that we secure 2010 and future supply at effective, if not always minimum, cost. In the second half of 2009, we saw a return of volatility to fluctuations in certain key commodity markets and we continue to evaluate and maintain risk strategies to protect input costs from this effect. Hedging contracts for most of the 2010 aluminium requirements are now closed. During the year, a joint review by Finance and Purchasing functions of currency risk management resulted in the implementation of new procedures for the evaluation and monitoring of currency risk as well as the commercial evaluation of purchasing contracts involving foreign currency.

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