23
Risk Management (continued)
Main risks
Strategic risks
Regulatory changes related
to alcohol
Recent developments
Economic and political
environment
Recent developments
Customer relationships
Recent developments
Heineken NV.
Report of the
Report of the
Financial
Sustainability
Other
Annual Report 2016
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
The following risk overview highlights the main risks that could hinder HEINEKEN 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, known 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 30 to the Financial Statements. The Statement of the Executive Board is included in the
Corporate Governance Statement on page 33.
What could happen
Alcohol remains under scrutiny in many
markets and prompts regulators to take further
restrictive measures including restrictions
or bans on advertising and marketing,
sponsorship, availability, and increased
taxes and duties leading to lower revenues
and profit.
What we are doing to manage this risk
Responsible consumption is one of the
priorities of HEINEKEN's Brewing a Better
World sustainability programme. Using the
power and reach of its brands, HEINEKEN
strives to make responsible consumption
aspirational and works closely with local
governments, NGOs and specialists to prevent
and reduce harm caused by abuses such as
under-age drinking or drinking and driving.
Restrictive measures on alcohol consumption
and sale continue to be taken across
geographies, especially through excise duties
increases as in Vietnam, Greece, Egypt and
Russia. Continued focus by WHO, OECD,
UN and EU on alcohol as part of the
Non-Communicable Disease agenda
could lead to additional restrictions which
would impact HEINEKEN's business across
multiple geographies.
What could happen
Throughout the world, local or regional
economic and political uncertainties could
impact our business and that of our customers.
In particular, the risk of an economic recession,
change of laws, trade restrictions, inflation,
fluctuations in exchange rates, devaluation,
nationalisation, financial crisis, or social unrest
could adversely affect our revenues and profits.
What we are doing to manage this risk
HEINEKEN has set up various tools to limit
the impact of such events on its business
such as supplier management, short-term
liquidity management, tight foreign exchange
monitoring, prudent balance sheet measures,
and scenario planning. For events which
could threaten the continuity of the business,
contingency plans are in place.
Political risk has expanded beyond emerging
markets and has become a permanent
element of the economic landscape. Brexit and
the change of administration in the US have
created significant additional uncertainties.
Agility has become a priority to enable
businesses to navigate subsequent changes in
laws, currency movements, import restrictions,
scarcity of hard currencies, and their impact
on the Company's profit.
What could happen
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.
What we are doing to manage this risk
HEINEKEN constantly invests in its business
relationships and has developed joint business
plans with distributors and key retailers,
while enhancing sales performance through
commercial capabilities programmes and
customer relationship management at central
and local level.
The retail consolidation wave seen in the past
five years in most developed markets has not
yet passed. This has led HEINEKEN to tap
into new distribution channels, such as online
retail, and to develop a unique and innovative
sales approach to boost its on-trade business
which is currently being rolled out across all
four regions.