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Risk Management
Main Risks
Regulatory changes related to alcohol
What could happen?
Recent developments
What we are doing to manage this risk?
Economic and political environment
What could happen?
Recent developments
What are we doing to manage this risk?
Environmental legislation
What could happen?
Recent developments
What are we doing to manage this risk?
Heineken N.V.
Annual Report 2020
Introduction
Report of the
Executive Board
Report of the
Supervisory Board
Financial
Statements
Sustainability
Review
Other
Information
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.
- Financial risks are reported separately in note 11.5
to the Financial Statements on page 105.
- The Statement of the Executive Board is included in
the Corporate Governance Statement on page 48.
- The way we manage our Responsible
Consumption, Business Conduct and Human
Rights risks are further detailed in the
Sustainability Review section of our Annual
Report on pages 125-159.
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, adding health
warnings to labelsincreased 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.
Restrictive measures on alcohol consumption and sales
continue to be taken by authorities and regulators across all
four regions.
Many governments have responded to the COVID-19
pandemic with measures that directly or indirectly impact
alcohol producers. In particular, measures impacting
breweries, bars, restaurants, hotels and other locations
where people come together have become a frequent
tool for governments trying to mitigate infection rates.
These policies restrict the availability of our products
and can have a negative impact on our business in
affected markets.
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 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 expanding consumer choice for those who
choose not to drink alcohol by providing low- and no-
alcohol brands.
With respect to COVID-19, we have proactively
communicated with our operating companies around the
world to share best practices for adapting to unexpected
restrictions and mitigating negative consequences.
Explore Further:
Advocating responsible consumptions, pages 140-143
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 law, trade restrictions, inflation,
fluctuations in exchange rates, devaluation, nationalisation,
financial crisis or social unrest could adversely affect our
revenues and profits.
COVID-19 has forced major containment measures,
diminished economic activity and required drastic fiscal and
monetary actions to protect jobs and markets. More structural
shifts could happen and lead to a prolonged recession of
the global economy, with increasing risk of bankruptcies
and the potential failure of certain sectors to fully recover,
despite the unprecedented response from governments. As a
consequence, structural unemployment - especially for youth
- is likely to surge with knock-on effects on consumer demand.
Public debt, the disruption of global value chains and barriers
to the cross-border movement of people and goods round out
the key risks.
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.
HEINEKEN has set up various tools to limit the impact
of such events on its business. They include 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.
We continuously review our costs base to increase
operating leverage.
HEINEKEN not being able to respond to the impact of
environment-related changes on our operations in a timely
manner. If new environmental legislation is introduced,
this could lead to legal claims, increased compliance
costs, restrictions on production, packaging, distribution,
selling and marketing of our products, reputation damage,
and limits on our licence to operate resulting in negative
business impact.
Speed and scope of environment-related changes on our
operations are increasing. 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.
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 and to prepare the business for future changes.
Beyond this, HEINEKEN closely works with experts
such as NGOs, universities, governmental organisations
and suppliers across the value chain. It also co-operates
with peer companies in international and national
organisations such as Brewers of Europe, Beverage Industry
Environmental Roundtable and the Dutch Sustainable
Growth Coalition.
