Risk Management
Contents
Overview
Report of the
Executive Board
Report of the
Supervisory Board
Financial
statements
Other information
Introduction
The following chapter presents an overview of HEINEKEN's approach to risk management and control systems and a description of
the nature and extent of its exposure to risks. The risk overview highlights the main risks known to ElEINEKEN, which could hinder it in
achieving its strategic objectives. The risk overview may, however, not include all the risks that may ultimately affect El EINEKEN. Some
risks not yet known to EIEINEKEN, or currently believed not material, could ultimately have a major impact on EHEINEKEN's reputation,
strategic objectives, revenues, employees or capital resources. Effective management of risks is an integral part of how EIEINEKEN
operates as a business. Identifying, assessing, prioritising and managing risk enables EIEINEKEN to protect the Company and its
brands against reputational and financial damage, to safeguard its employees and to achieve its strategic objectives.
Risk profile
EIEINEKEN is a predominantly single-product business operating throughout the world in the alcohol industry. Taking risks is an inherent
part of entrepreneurial behaviour. A structured risk management process allows EIEINEKEN to take risks in a managed and controlled
manner. The international spread of the country portfolio geographically and between mature and emerging markets, a robust
balance sheet and strong cash flow form the context based on which EIEINEKEN determines its appetite to risk when doing business.
EIEINEKEN has undertaken economic activity with other parties in the market in the form of joint ventures and strategic partnerships.
As EIEINEKEN generally does not have a majority of the shares and voting rights in these entities, decisions taken by its joint venture
and strategic partnership entities may not be fully harmonised with EHEINEKEN's strategic objectives.
In recent years, there has been increased media, social and political criticism directed at the alcoholic beverage industry. An increasingly
negative perception in society towards alcohol could prompt legislators to implement restrictive measures such as limitations on
availability, advertising, sponsorships, distribution and point-of-sales and increased government tax and may cause consumption
trends to shift away from beer to non-alcoholic beverages. Negative publicity, restrictive measures and potential change in consumption
trends could lead to a decrease in brand eguity and sales of EHEINEKEN's products. In addition, it could adversely affect EHEINEKEN's
commercial freedom to operate and restrict the availability of EHEINEKEN's products.
Risk Management and Control System
EIEINEKEN has established and operates its risk management and control system based on the COSO Internal Control-Integrated
Framework. The EIEINEKEN Company Rules and Code of Business Conduct, which set the boundaries within which all of EHEINEKEN's
operating companies and employees operate, are key elements of the risk management and control system. This system identifies,
assesses, prioritises and manages risks on a continuous and systematic basis, and covers all of its operations across regions, countries,
markets and functions. EIEINEKEN aims to monitor, adopt, develop and implement industry-wide best practices in its risk
management and control system.
EHEINEKEN's governance cycle and financial reporting system are key elements of its risk management and control system.
The identification and assessment of risks is an integral part of the three-year strategic business plans drawn-up by the operating
companies, regions and global functions and approved by the Executive Board each year. The Executive Board of EIEINEKEN has
overall responsibility for risk management, and has established a Governance, Risk and Compliance Committee (chaired by EHEINEKEN's
Chief Financial Officer) to oversee the adeguacy and functioning of EHEINEKEN's risk management and control system. The overall
effectiveness of the risk management and control system is periodically reviewed by the Audit Committee.
Financial reporting
The risk management and control system for financial reporting includes clear accounting policies, a standard chart of accounts and
Letters of Representation signed by regional, functional and local management. The EIEINEKEN common systems and embedded
control frameworks are implemented in a large number of the operating companies, and support common accounting and regular
financial reporting in standard forms. Testing of key controls relevant for financial reporting is part of the Common Internal Audit
Approach in operating companies on common systems. The external audit activities provide additional assurance on the financial
reporting. The external auditors also report on internal control issues through their management letters, and attend the regional
and certain local assurance meetings.
Eleineken N.V. Annual Report 2013
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