Risk Management (continued)
Main Risks
Regulatory changes
related to alcohol
Economic and
political environment
Environmental
impact
O O Qs
Report of the Executive Board^^^M Report of the Supervisory Board
The following risk overview highlights the main
risks that could hinder HEINEKEN in achieving its
strategy and business objectives. We recognise that
this is not a full overview of all risks and uncertainties
that may affect the Company. As new risks emerge
and existing immaterial risks evolve, timely discovery
and accurate evaluation of risks are at the core of
HEINEKEN's risk management system.
The financial risks are reported separately in note
11.5 to the Financial Statements on page 101.
The Statement of the Executive Board is included
in the Corporate Governance Statement on page 47.
The way we manage our Business Conduct and
Human Rights risks are further detailed in the
Sustainability Review section of our Annual Report
on pages 121-157.
What could happen
The topic of alcohol and health is under scrutiny
in many markets. This may prompt regulators
to take further measures limiting HEINEKEN's
freedom to operate, such as restrictions or bans
on advertising and marketing, sponsorship,
availability of products, including health warnings
on labels and increased taxes and duties or the
imposition of minimum unit pricing. These could
lead to lower overall consumption or to consumers
switching to different product categories.
Recent developments
Restrictive measures on alcohol consumption
and sales continue to be taken by governments
across all four regions. Continued focus by WHO,
OECD, UN and the 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 we are doing to manage this risk
HEINEKEN strongly believes in the importance of
reducing alcohol related harm, and responsible
consumption is one of the priorities of HEINEKEN's
Brewing a Better World sustainability programme.
Using the power and reach of its brands through
campaigns like the award-winning When You Drive
Never Drink, HEINEKEN strives to make responsible
consumption aspirational for all our consumers.
The Company works closely with local governments,
NGOs and specialists to prevent and reduce harm
caused by abuses such as underage drinking
or drinking and driving. We are also expanding
consumer choice for those who choose not to drink
alcohol by providing low- and no-alcohol brands.
Explore Further:
Advocating responsible consumption, pages 137-140
Financial Statements
Sustainability Review
Heineken N.V. Annual Report 2019
Other Information
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.
Recent developments
Political instability has expanded beyond emerging
markets to become a permanent element of
the economic landscape. We see an economic
slowdown in a number of markets. The increased
pressure on international free trade and Brexit
have created significant uncertainties. Agility has
become a priority to enable businesses to navigate
subsequent changes in laws, currency movements,
import restrictions, scarcity of hard currencies,
commodity pricing and their impact on the
Company's profit.
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 in respect to resource allocation. We have
monitoring mechanisms in place globally and
locally, to allow us to monitor, report and engage
proactively on political risks. For events which could
threaten the continuity of the business, contingency
plans are in place.
What could happen
HEINEKEN not being able to timely respond to
the impact of environmental related changes on
our operations. If new environmental legislation
is introduced, this could lead to legal claims,
increase of compliance costs, restrictions on
production, packaging, distribution, selling and
marketing of our products, reputation damage
for the Company, limits on our licence to operate
resulting in negative business impact.
Recent developments
Speed and scope of environmental related changes
on our operations are accelerating. Markets need
to be prepared to timely respond and adapt
to these changes, to prevent restrictions in all
areas of the value chain and significant costs
to ensure compliance.
What we are doing to manage this risk
Environmental sustainability is one of the
priorities of HEINEKEN's Brewing a Better World
sustainable development strategy. HEINEKEN
continuously monitors existing and emerging
environmental issues and regulations across the
globe, to ensure awareness and compliance to
prepare our business for future changes. Beyond
this, HEINEKEN closely works with experts, such as
NGOs, universities, governmental organisations and
suppliers across our value chain and co-operates
with peer companies in international and national
organisations, such as Brewers of Europe, Beverage
Industry Environmental Roundtable and Dutch
Sustainable Growth Coalition.
Explore Further:
Reporting basis and governance of non-financial indicators,
page 148
