CONSOLIDATED FINANCIAL STATEMENTS >
DIRECTORS’ REPORT
80
| 2013 ANNUAL REPORT | PRYSMIAN GROUP
risk model designed to capture a wide portfolio view of the
potential risks, both of external or internal origin, to which
the business could find itself exposed. This model takes into
consideration the following five main categories of risk:
• Strategic Risks, linked to external or internal factors that
may affect the Group’s results or decisions relating to
strategies, activities, organisational structure, etc.;
• Financial Risks, associated with the amount of available
financial resources and the ability to manage currency and
interest rate volatility efficiently;
• Operational Risks, arising from the occurrence of events or
situations that may limit the effectiveness and efficiency
of key processes and are able to have an impact on value
creation;
• Legal and Compliance Risks, relating to any shortcomings
in defining or executing the Group’s procedures that might
lead to infringements of the law;
• Planning and Reporting Risk, related to the adverse effects
that irrelevant, untimely or incorrect information could have
on strategic, operational and financial decisions.
Under the risk model adopted, the process starts with a
top-down approach, in which it is the Chief Risk Officer, the
Board of Directors and Senior Management who together
define the areas of risk most relevant to the achievement
of strategic objectives; these areas must then be further
analysed to identify specific risk situations and events for
measurement and assessment at later stages of the process.
The top-down approach allows the Group’s risk portfolio to be
evaluated as a whole and, where relevant risks are identified,
allows appropriate measures to be taken to reduce the risk of
underestimating such risks or their possible interaction with
risks of another kind.
Functional heads and Region, Country and Business Unit
managers are required to use a clearly defined method to
measure and assess risk situations and events, taking account
of the Impact of the risk, the Likelihood of its occurrence
and the Adequacy of Risk Management should the risk
materialise:
• Impact is assessed both with reference to the Financial
impact, measured, where possible, in terms of expected
EBITDA or cash flow at risk, and with reference to the
Reputational and Operational impact, using a rating scale
that goes from negligible to critical, which must also take
into account the Group’s level of risk tolerance or risk
appetite, as defined by the Board of Directors;
• Likelihood is assessed in relation to the probability that
THE PRYSMIAN RISK MODEL
Strategic
Financial
Operational
Legal & Compliance
Planning & Reporting
Changes in
macroeconomic and
competitive environment
and in demand
Stakeholders’ expectations
Key customers and
business partners
Emerging market risk
M&A/JVs and related
integration processes
Investments
Strategy implementation
Organisational structure
& governance
Commodity price
fluctuation
Exchange rate fluctuation
Interest rate fluctuation
Financial instruments
Credit risk
Liquidity/working capital
Availability/cost
of capital
Financial counterparties
Sales and calls for tender
Production capacity/
efficiency
Supply chain capacity/
efficiency
Business interruption/
catastrophic events
Contract performance/
liability
Product quality/liability
Environment
Information systems
Human resources
Outsourcing
Intellectual property
rights
Compliance with laws
and regulations
Compliance with Code
of Ethics, policy
e procedures
Budget & strategic
planning
Tax & financial planning
Management reporting
Financial reporting
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