7.1 Risks, opportunities and uncertainties
Carrying out business activities and achieving the targets entails opportunities and risks. Royal Avebe aims to seize the opportunities that present themselves while considering the risks involved.
Risk management is part of how Avebe wants to implement its strategy, and it is important for achieving its short-term and (medium) long-term objectives. Avebe wants to identify these risks in time, analyse them and manage them effectively and efficiently. This way, we are better able to translate the strategy within the organisation into opportunities and risks and to achieve and monitor the objectives.
Risk management
Risk management is applied throughout the organisation, under the responsibility of the board and the executive committee and under the supervision of the supervisory board up to the workplace. At Avebe, the coordination of the risk management system is the responsibility of the Internal Audit & Risk Management director, who reports to the executive committee and the audit committee. The Internal Audit & Risk Management director is tasked with securing the risk management process, facilitating risk sessions and providing reports. The performance of the risk management system is actively monitored. To increase risk awareness, periodic workshops are held to discuss risks, assess them and take action. The results of the risk management system and the fraud risk assessment are periodically reported to the board and the audit committee. This way, the audit committee and the supervisory board are actively involved in Avebe’s risk management process.
Risk management is carried out along three pillars: strategic risk management, major investment projects and operational risk management, including compliance with legislation and regulations. Financial and sustainability risks are also taken into account, including reporting risks and an annual fraud risk assessment.
Risk tolerance
Risk tolerance is reviewed periodically in Avebe’s executive committee and leadership team. The results of this assessment are accounted for in the audit committee of the supervisory board. In making decisions, a balance is sought between Avebe’s strategic targets and the associated risks and opportunities with the set risk tolerance.
Main risks
e outline the key risks and corresponding control measures that arise from the risk management process. This selection is based on an assessment of the likelihood of the risk occurring and the potential impact if it does. The overview of risks is divided into four categories: strategic, operational, compliance, and financial risks. Financial risks are disclosed in the financial statements, notes to the consolidated balance sheet, under ‘Financial instruments'.
7.2 Main risks
| Risk | Causes and consequences | Risk Causes and consequences Control measures | Trend |
|---|---|---|---|
| Strategic risks | |||
| Failure to achieve strategic objectives (together towards more value, strengthening the foundation, accelerating towards plant-based and new horizons) | • Changes in relevant legislation and regulations and uncertainty surrounding agricultural policy have a major impact on our members and therefore also on the yield from the area for Avebe. The change of government in the Netherlands is creating new uncertainties regarding agricultural policy. • Macro-economic developments (such as inflation, recession, interest rate developments, exchange rates) put pressure on Avebe's return and therefore on the return of our members. • Extreme weather conditions (drought or precipitation) and difficult to control soil diseases can lead to a significant reduction in the supply of starch potatoes. • Insufficient financing for the necessary investments can result in us not achieving strategic objectives. • Because the market is dynamic and uncertain, making investments in relevant and well-timed products is extremely important. • Sustainability requires sufficient awareness. If not, there is no urgency and investments are under pressure. This can lead to not achieving one of the strategic objectives (on time), damage to reputation, loss of turnover, customers, members, suppliers and employees. |
• Based on scenario analyses (such as: what to do in the event of lower potato yields or extreme drought), we draw up a management plan. • Increasing product focus and cost awareness within Avebe to continue to achieve sufficient returns for our members. • Optimising the cultivation yield per hectare. • (Continued) development of new resistant starch potato varieties. • Putting the customer first and striving for optimum customer satisfaction. • Focusing on the quality of our project management to complete projects on time, within budget and in accordance with quality requirements. • Innovation policy based on market needs and a proper balance between short-term and long-term innovation. • Implementation of measures through transparent project management with measurable KPIs. • Monitoring of the effect of our implementation strategy by an internal strategic agency. • Sustainability is an integrated part of our strategy and has been translated into KPIs. Monitoring this is part of the planning & control cycle. • Public affairs activities in relation to, for example, legislation and agricultural policy. |
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| Rising prices and availability of raw materials | • The geopolitical tensions have consequences for global trade, which has put pressure on the prices and availability of raw materials (other than potatoes). • The increase in prices and the scarcity of raw materials has led to an increase in the cost price of our products. This may result in it no longer being profitable or, in the worst case, not being possible to produce certain products. Price fluctuations cannot always be passed on to the customer in full or in a timely manner, which may affect the result. |
• An active purchasing policy that ties in well with our S&OP process enables us to identify bottlenecks in the availability of raw materials at an early stage. • Continuous monitoring of cost developments in the market enables us to identify price developments and shortages in the raw materials market in good time. • Partly in light of our sustainability objectives, we actively invest in sustainable solutions to reduce our energy demand. • The rising prices for raw materials are passed on to Avebe's customers where possible. • The risk of rising energy costs is partly mitigated by covering our future energy needs. • The costs for energy prices are assessed daily, whereby we actively determine our purchasing strategy. |
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| Operational risks | |||
| Cyber security risk | • High degree of automation in primary business processes. • Insufficient security of software, hardware and networks can lead to security risks. • Insufficient awareness of employees regarding cyber security risks. • A continuous race between external intruders and the security measures that are taken. This can lead to hacked systems, downtime of production processes, theft of crucial data, damage to reputation, loss of market advantage and financial damage. |
In line with the upcoming European NIS2 Directive (Network and Information Security Directive), we are further strengthening our cybersecurity measures. This directive imposes stricter requirements on risk management, incident reporting, and supply chain responsibility. Avebe is preparing for this by enhancing governance, conducting risk analyses, and formalising procedures for incident response and reporting. Examples include: • We have an IT security department that monitors the security of Avebe and its systems. • An external agency provides 24/7 monitoring of (unauthorised) access to Avebe systems. • Processes and procedures for updating software and hardware. • Strengthening our firewalls and network segments. • Increasing awareness among staff by making them aware of security risks. • Periodic vulnerability scans and penetration tests. • Only authorised employees have access to the server rooms. |
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| Data center/ICT system failure | • A calamity at the location of our data center, for example due to a power failure, explosion or flooding. • A facility in the data center that fails due to technical or process causes. This can lead to the (complete) non-functioning of operational production, the networks at office locations and foreign locations. |
• Fire and extinguishing facilities have been installed. • A backup for the power supply has been set up. • Additional systems in the data center to absorb a system failure (redundancy). • The data center is well maintained. • Backups of office data are made and stored at a location other than the data center. • A disaster recovery plan has been drawn up. • Only authorised employees have access to the server rooms. • As an additional measure to our existing data centre security and redundancy, we are adopting a hybrid cloud strategy. Critical systems are being gradually migrated to high-availability cloud environments, reducing reliance on a single physical location and improving the continuity of business operations. |
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| Increase in the number of employees who are not sufficiently competent to do their work for Avebe | • Changing working conditions due to new processes, technology or organisational structure. • Employee illness, partly due to an aging workforce. • Lack of clarity among employees because performance objectives are not sufficiently specific. • Appraisal interviews that do not take place on time. • Insufficient information/insight for managers to steer on the competencies and training requirements of employees. This can lead to lower productivity, more production errors and limited insight into training requirements and requirements. Insufficient alignment of employee training with the needs of the organization leads to incorrect strategic formation planning. |
• Interventions by company social work. • Employees are offered a Periodic Medical Examination. • The Time Task Competence methodology is used to gain insight into the cause of absenteeism or inadequate performance. • We set up strategic formation planning and use this as a management tool. • At the production locations we use a deployability matrix to determine workplace suitability. • We use a digital learning platform (LMS) for training and education. • Process around the conversation cycles with employees. • Use of Case Management within Avebe. |
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| Personal safety | Employees of Avebe and third parties run safety risks when carrying out work in the factories and on the production location, for example due to: • Open production processes, e.g. maintenance/cleaning of washing drums and vacuum dryers. • Risk assessment is not up-to-date which creates possible causes for injuries. • Changes to procedure are not always correctly implemented. This can lead to personal accidents, sanctions by the Labour Inspectorate (and related reputational damage), business interruption or (civil) lawsuits. |
• A BNO/BHV organisation has been set up for each location. • Avebe has implemented safety zoning at production locations and procedures around personal protective equipment and periodic safety rounds. • A safety awareness program is being implemented. • Contractors and suppliers receive safety instructions. • In case of unsafe situations, these are reported and followed up. • Safety studies are carried out in the form of HAZOP studies and Risk Inventories and Evaluations. • Explosion safety documents are provided. |
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| Contamination of products (in production process or storage) | • Insufficient food safety in the production of our products. • If the security of external silos fails, criminals can gain access. • Terrorists or criminals who contaminate or poison our products (food fraud). Contamination leads to loss of value of Avebe products and reputational damage. In the worst case, it can lead to the processing of contaminated Avebe product, resulting in (health) risks and the recall of products. |
• Physical access security at the factories and storage locations. • Avebe is AEO and FSSC22000 (food safety) certified by internal and external audits. • Investments are made in measures that guarantee food safety. • Several standard procedures (e.g. for recalls and complaint handling) have been set up, including escalation via a crisis management process. |
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| Compliance risks | |||
| Fraud and corruption | • There is a risk of theft of resources and knowledge of the organisation (such as tools, buyers, patents and competition-sensitive product information). • Reporting fraud. • Fraud relating to products within the food industry (food fraud). • In countries without their own sales organisation, Avebe uses foreign agents. This can lead to various consequences such as financial losses and reputational damage. |
• All codes of conduct are shared with employees (Corporate Governance Code, Whistleblower Procedure, Internal Code of Conduct, Speak-up Scheme and Competition Manual). • Workshops are organised for external employees. • An IT Security and Privacy policy has been drafted and implemented. • A sanctions policy has been drafted and implemented in the ERP system, with continuous monitoring on customers and suppliers in relation to most up-to-date international sanctions lists. • Contracts with agents are drawn up on the basis of an established standard, including a right-to-audit. • A background check is carried out for both new and existing agents. • Separation of functions in processes, we explicitly separate management functions from disposition functions. • Periodically, our fraud risk analysis and related control measures are reviewed via internal audit. • In addition to existing control measures such as segregation of duties, background checks, and codes of conduct, we are focusing on continuous monitoring. Through data analysis and automated checks on transactions, suppliers, and user behaviour, anomalies can be detected and investigated more quickly, enhancing the effectiveness of fraud prevention. |
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| Changing legislation and regulations |
Changes in legislation and regulations can have consequences for the activities of Avebe, our members and our contracting parties. Avebe complies with legislation and regulations on, among other things, food safety, the environment, production processes (including ATEX), safety of plant and equipment (for example BRZO) and HR. Failure to comply with legislation and regulations can lead to the (temporary) loss of the license to operate at the production locations, examples of this include: • Major Accidents Risk Decree/Seveso: failure to meet the requirements set out in the Decree • ATEX (dust explosion): • Backlog of required ATEX modifications; • No ATEX-based design/materials/tools for changes/ maintenance. |
• Changes in relevant legislation and regulations are actively monitored and assessed. • All critical issues and changes in legislation and regulations relevant to us are discussed with the authorities in a timely manner in order to agree on licensing conditions with them. • A safety management system that meets the requirements of BRZO/Seveso has been implemented at our production locations. • Explosion safety documents are provided. • We raise ATEX awareness by training our employees. • Reducing dust formation is an ongoing point of attention during maintenance and adjustment of the production process. • Cleaning procedures and safety inspection rounds. • The safety management system is subjected to periodic internal and external audits. |
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▲ = risk has increased; ▼ = risk has decreased; ► = risk has remained the same
