Risk Management continued
Reportofthe Reportofthe Financial Other
Contents Overview Executive Board Supervisory Board Statements Information
Main risks
The following risk overview highlights the main risks could hinder H EIN EKEN in achieving its financial and strategic objectives or could represent a threat to
the business. This overview does not include all risks and uncertainties that may ultimately affect the Company: some risks currently deemed immaterial,
or unknown to the Company, could ultimately have an adverse impact on HEINEKEN's financial performance, reputation, business objectives, employees
or assets. Timely discovery and accurate evaluation of such risks is at the core of HEINEKEN's risk management processes. The financial risks are dealt with
separately in note 32 to the Financial Statements. The Statement of the Executive Board is included in the Corporate Governance Statement on page 34.
Strategic risks
Risk description
Regulatory Changes related to Alcohol
Alcohol remains under scrutiny in many markets and prompts
regulators to take further restrictive measures including restrictions
and/or bans on advertising and marketing, sponsorship, points of sale,
and increased taxes leading to lower revenues and profit.
Specific risks include:
Increased restrictions on commercial freedom
Increased taxes and duties
Increased restrictions on availability
Economic and political environment
The economic and political uncertainties could impact our business
and that of our customers. This may lead to lower volumes, pressure
on selling prices and increased credit risk and suppliers' insolvency.
Specific risks include:
Downtrading
Increased taxes
Insolvency of key customers or of critical suppliers
Impairment of goodwill related to acquisitions
Adverse exchange rate fluctuations
Pension plan shortfalls due to developments in the
financial markets
Risk Management
Placing of responsible consumption labels on HEINEKEN's products
Continuous advocacy of responsible consumption of HEINEKEN
products
Co-operation with governments, NGOs and businesses to prevent
abusive consumption
Global commitments by alcohol producers to support reduction in
abusive consumption
Innovations in low alcohol and alcohol-free products
Monitoring and mitigating actions related to customers' solvency
Global Credit Policy
Supplier selection process
Developing contingency plans
Taking prudent balance sheet measures
Strengthening of short-term liquidity positions
Training country general managers in Public Affairs
Customer relationships
Maintaining strong relationships with our customers is key for
brand positioning and availability to consumers. Consolidation among
our customers may affect our ability to obtain pricing and favourable
trade terms, and negatively impact our operating margin.
Specific risks include:
Limited ability to raise prices
Increased cost of promotional activities
Inability to secure appropriate shelf space
Management of customer relationships at central level
(multinational customers) as well as local level
Development of joint business plans with distributors and
key retailers
Central commercial capabilities programme to enhance sales
performance (Excellent Outlet Execution)
Changing consumer preferences
Consumers' preferences and behaviours are evolving, shaping an
increasingly complex and fragmented beer category. This requires
HEINEKEN to constantly adapt its product offering, innovate and
invest to maintain the relevance and strength of its brands. Failure
to do so would in the longer term affect our revenues and profit
Specific risks include:
Inability to further build our brands due to lack of consumer insight
Loss of brand equity and market share of HEINEKEN brands
Strengthened commercial organisation
Central marketing academy
Investments in consumer and market intelligence
Strengthened innovation organisation and focus to anticipate
and respond to industry changes
Investments in protecting brands, including the registration
of trademarks, anti-counterfeit measures and domain names
24 Heineken N.V. Annual Report 2015
