Risk profile Cosun is active in a variety of agro-industrial markets in several countries and has to contend with strategic, operational, financial and compliance risks that are inherent in its activities. Its strategy is to control these risks and exploit opportunities wherever possible by maximising the value it extracts from its raw materials, by means of operational excellence, a targeted product/market strategy, new product/market combinations and cooperation with growers, customers and suppliers, among the Cosun businesses themselves and with knowledge centres and educational institutions. We will limit the risks wherever possible but also take advantage of all the opportunities.

RISK ANALYSIS
Cosun recognises the importance of risk management to identify and where possible mitigate risks at an early stage. All business groups periodically identify, analyse and evaluate potential material and immaterial risks with regard to both their likelihood and their impact. This process is periodically repeated, with specific attention being paid to quantifying and evaluating the main risks during the budget cycle. The results of these analyses are used to define actions to mitigate the main risks wherever possible.

The progress made implementing these actions is reported to the Executive Board. As part of a four-year cycle, a comprehensive risk analysis was made in 2016 with the aid of a detailed framework to assess all risks and their impact on the business groups’ activities. Our decision to opt for a portfolio with five core activities has had a positive impact on maintaining Cosun’s results even in times of low sugar prices.

The analyses have led to improvements in a number of areas:
  • The EU common sugar market will end in 2017. We expect pressure on prices to increase as manufacturers increase their output. The European sugar price is expected to be linked more tightly to the world sugar price. Cosun will also step up its sugar production in 2017 and create additional sales by selling to areas with shortages in Europe or exporting to the world market.
  • The pressure on sugar’s image may also influence sales in our region. However, the world market is growing by about 2% per annum and we expect to achieve higher sales. We will also step up our provision of information, for instance via www.suikerinfo.nl.
  • The impact of Brexit is difficult to estimate at present. The United Kingdom is an important sales market as we realise about 10% of our turnover there.

RISK APPETITE
With our risk management and internal control systems we seek the right balance between entrepreneurship on the one hand and an acceptable risk profile on the other.

RISK CATEGORY STRATEGIC PILLAR RISK APPETITE AND EXPECTED RETURN
Strategic Profitable growth
  • Medium/high: right balance between risk and return.
  • Medium: size of investments in manufacturing footprint relative to projected return and payback.
Tactical/operational Operational excellence / cost control
  • Low in respect of safety issues.
  • Medium in other areas/issues, with coordination of targets and related costs and attention to profitability
  • Moderate in respect of position management, with a focus on insight into potential risks.
Financial control & Compliance
  • Low in respect of financing, interest and currency risks.
  • Low in respect of product and food safety.
  • Low in respect of full compliance with local legislation and regulations.

RISK MANAGEMENT STRATEGY
Our internal control system is designed to:
  • control the risks attaching to the business activities;
  • identify on a timely basis risks that had previously not been recognised as risks or had been considered immaterial;
  • prepare action plans for each risk if desirable and possible to control and/or mitigate the risk;
  • monitor the effectiveness and efficiency of business processes, including administrative processes.

IMPROVEMENTS IN THE RISK MANAGEMENT SYSTEM
Safety and safe working conditions have high priority within Cosun. The measures we have taken are reflected in a decline in the number of incidents. We will continue to invest in prevention. Aviko’s position risk has been reduced by an increase in fixed price hedging of potatoes. Further investments have been made to strengthen a structured and systematic approach to innovative projects. The pension scheme is a defined contribution scheme. However, Cosun has given a guarantee until 2023 to finance the accrual and partial indexation of the scheme, whereby the amount of the contribution is influenced by interest rate movements.

RESPONSIBILITY
Primary responsibility for the internal control system lies with the boards of the business groups themselves. The Executive Board and the Board have final responsibility for Cosun’s risk management and internal control systems.

DESIGN
At Cosun we apply the Cosun Principles. They direct our actions and conduct and are periodically brought to the staff’s attention. Cosun has also introduced a whistle blower scheme and the Cosun Speak Up line so that staff can report cases that might conflict with the Cosun Principles, anonymously if they prefer. Cosun adheres to accounting principles and has prepared financial and control instructions that include detailed guidelines on financial reporting and accounting. The business groups’ financial managers report functionally to Cosun’s Chief Financial Officer.

MANAGEMENT
  • All business groups draw up three-year operating plans. Detecting and pro-actively responding to risks and opportunities are part of the operational planning procedure and are considered in monthly and quarterly reports. The results are discussed on a monthly basis at Executive Board level and on a quarterly basis at Board and Supervisory Board level.
  • Risk management is an integral part of the operating plans and budgets and the internal monthly management and financial reports.

MONITORING
  • The external auditor conducts an annual audit in order to express an opinion on the consolidated accounts and the businesses concerned. The external auditor is appointed by the Members’ Council and reports primarily to the Supervisory Board. The audit scope and depth are determined annually in consultation with the Executive Board and the Supervisory Board, whereby the minimum work required for the audit opinion is extended to cover specific risks, business processes or locations that the Supervisory Board or the Executive Board believes should receive additional attention.
  • The general managers and finance managers of all legal entities in which Cosun has a majority interest sign a Letter of Representation each year for the entities for which they are responsible. In it, they declare that they have acted in accordance with internal guidelines and with the rules arising from legislation and regulations.
  • Recommendations arising at every level from the external audit are reported to and followed up by the Executive Board. The Executive Board subsequently reports to the Board and the Supervisory Board.