SHV has developed a robust approach to risk assessment and mitigation over recent years. Key business risks are regularly updated at both SHV and Group level to stay relevant in the face of ever-changing operating environments. All related controls are also continuously optimised to ensure we effectively monitor and manage specific risks. The Groups are provided with clear guidance to ensure a consistent performance.
In this chapter, we outline our overall risk framework, the key risks we face, and how we manage them on a day-to-day basis.
All Groups and their respective business units conduct comprehensive risk assessments, using common rating and reporting criteria based on the SHV Risk Assessment Approach. This helps to build a clear overview of the key risks in terms of likelihood, impact, acceptance, and ability to mitigate. This in turn provides a basis for discussion at planning and strategy meetings, as well as a benchmark for the effectiveness of internal controls.
SHV Policies and Guidelines provide the Groups with clear direction on the standards expected from all colleagues. They not only support everyone in conducting business better, but also guide us on the journey to becoming an ever more self-evaluating and faster learning organisation.
The Business Support Framework (BSF) equips Groups with the key controls they need to monitor their performance in line with the SHV Policies and Guidelines. These controls are assessed throughout the year by the Groups themselves, as well as by independent Internal Control departments. Each Group is also required to supplement them with business-specific key controls, which are reevaluated against the latest key risks on an annual basis.
The Delivery & Development Agenda measures and monitors the execution of strategy, classifying key strategic elements into concrete topics. Delivery Agenda topics relate to execution-ready initiatives, whereas the Development Agenda focuses on areas that require further exploration before moving to the execution phase. This structured approach provides a solid framework for the analysis of current performance as well as ongoing business developments.
A number of other programmes also support the Groups in addressing key risks and strengthening second-line monitoring of processes and control activities. In addition to the Ethics & Compliance framework discussed earlier, these initiatives include the SHV Information Security Programme (SISP), SHV Health & Safety Policy, and Minimum Global Standards for Project Management to name just a few.
As part of the annual risk management cycle, the Executive Board of Directors (EBD) and the SHV Functional Directors conducted a company-wide risk assessment over the course of 2023. The assessment set out to identify key risk areas, validate the effectiveness of internal control measures, and identify any actions required to mitigate risk within SHV parameters.
The assessment confirmed the company’s risk appetite as strategically open with a relatively cautious attitude to operations and finance. SHV remains steadfastly committed to safety, quality, and compliance. With respect to the latter, the Executive Board of Directors reiterated a zero-tolerance approach to areas such as fraud, bribery, and corruption.
The risk assessment was aligned with the Double-materiality Assessment, one of the building blocks of ESG reporting in accordance with the Corporate Sustainability Reporting Directive (CSRD). By adopting an outside-in perspective, the assessment identified ten key risks currently faced by the organisation.
Strategic risks
Description risk | How the risk is managed |
|---|---|
SHV operates in 75 countries with varying degrees of political, legal, and fiscal stability. This exposes us to a wide range of global and regional risks. Regional conflicts, unstable regimes and inflationary pressure (Russia > energy and agriculture, China > trade dynamics) may hamper our global objectives. | SHV and its Groups focus on the disciplined execution of strategic initiatives and the strengthening of market positions, together with an unwavering focus on controlling costs, managing working capital, and improving margins. With the increasing political unrest, macro-economic factors will continue to be felt over the coming years. SHV continuously monitors all developments and societal issues relevant to its interests. SHV and the Groups are committed to conducting business with integrity and operating in compliance with all applicable laws and regulations, guided by our Ethics & Compliance programme and SHV Tax Policies.
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A lack of the agility required to deal with unexpected crises and business risk exposures may negatively affect our business resilience. The lack of agility to drive digital transformation by leveraging technology and applying technological developments may also have an adverse impact on business resilience, effectiveness, and efficiency. | Agility remains a core element of the SHV Purpose, anchored in our People. We invest in comprehensive training and leadership development, enabling our workforce to build leadership qualities, adapt to change, and make decisions quickly. Together with the Groups, SHV cultivates an innovation-centric culture to drive organisational agility. The cross-Group Innovation Community collaborates across functions to scale up innovation across the entire SHV Family of Companies. Data remains pivotal to the value proposition and the performance of all business units, wielding a strong influence over investments, Sales and Operations Planning (S&OP), and working capital. To meet increased reporting requirements such as CSRD and Pillar 2, SHV and the Groups prioritise data-driven risk insights and process automation through initiatives such as Pulse - the SHV Data Strategy Programme led by Adaptfy, our integrated Data & Analytics (D&A) organisation. SHV Holdings and the Groups also collaborate on the Better Together programme. This aims to standardise IT services and lay the foundation for the digital initiatives that will help underpin business resilience, effectiveness, and efficiency. |
Reputational & Compliance risks
Risk description | How the risk is managed |
|---|---|
Failure to demonstrate the effectiveness of the ESG strategy and related roadmap may restrict the ability to meet societal demands as well as obtain long-term financing to achieve strategic initiatives. | Double materiality assessments (DMA), part of Corporate Sustainability Reporting Directive (CSRD), have defined the most relevant, ESG-related material topics for all Groups. Short- and longer-term targets have been set and action plans defined for each topic. Progress is monitored through a quarterly review of the action plans and related KPIs. This review forms part of the regular business review cycle and is integrated into existing processes across all functional areas. |
SHV operations span a wide variety of cultural structures, complex rules, and strict regulations. Failure to comply with all relevant laws, regulations, and local perspectives on fair business practices may lead to fines, litigation, and reputational damage.
| A comprehensive set of measures ensures that SHV and the Groups fulfil their commitment to conducting business with integrity and operating in compliance with all applicable laws and regulations. The SHV Ethics & Compliance Programme focuses on Third Party Due Diligence, Anti-Bribery & Corruption, Trade Sanctions & Export Controls, Competition Law, Privacy, and Whistle Blowing. The E&C departments at both SHV and the Groups monitor emerging E&C trends in order to quickly respond to changing rules and regulations. In collaboration with Internal Audit, Legal, and Risk Management, all Groups need to adequately implement the E&C programme and monitor performance against E&C key controls as defined in the Business Support Framework. |
Operational risks
Risk description | How the risk is managed |
|---|---|
A lack of the right people in the right place to execute strategy, together with ineffective workforce planning, could hinder SHV strategic objectives In addition, an extremely competitive and tight job market in certain countries poses a risk to attracting and retaining talent. | Being seen as the employer of choice is playing an increasingly vital role in attracting and retaining the right workforce. SHV and the Groups undertake a number of initiatives to reinforce positive perceptions. This starts with a continuous learning approach to people development and leadership skills. Human-centred, futureproof programmes promote an inclusive culture: for example, the first round of the ‘Management Essentials’ programme was completed in 2023, focusing on a growth mindset, trust, psychological safety, and developmental feedback. Together with Groups, we continue to focus on employee value proposition (EVP) exercises, high-quality onboarding, and other initiatives such as a new cross-Group job board accessible to all colleagues via SHV website. |
Challenges in the supply chain due to disruptions and shortages in supply, inability to manage price increases, and ineffective forecasting could have a negative impact on our margins, product quality, and customer satisfaction. | Ongoing geopolitical uncertainties mean supply chains remain complex, increasing the need to secure supplies from different regions and sources. SHV and the Groups are working to enhance the accuracy of forecasting and improve data flows between Groups and SHV Holdings to generate better business insights more quickly. Actions to minimise the impact of supply chain disruptions on operational risks include integrated business planning, improved supplier management, centralised procurement, and joint buying. |
Cyberthreats and cybercrime are rapidly changing and continuously evolving. This increases the risk of disruptions in our operations, potentially harming our business and our client relationships. Increasing volumes of data also pose challenges to cyber resilience. | Beyond shielding the organisation from cyber threats, we are equally dedicated to detecting and quickly responding to any potential risks. Groups participate in cyber scenario simulations to practise and refine their responses to incidents. SHV Global IT and Group IT departments actively engage in the 'Better Together for Security' programme, which addresses essential security topics and heightens our readiness to manage cyber threats. We are also taking proactive measures in response to the SHV-wide audit on ransomware readiness. |
Risk description | How the risk is managed |
|---|---|
Lack of implementation / execution on safety programmes and systems may result in the inability to provide a safe work environment, support employee welfare, and prevent safety incidents. | Valuing the health and safety of all who work for and with SHV is a key part of our purpose. Our ultimate goal is Zero Harm: everybody should return home safely every day. All Groups develop, document, and annually update their safety programmes, which at the very minimum incorporate our three core initiatives:
These initiatives are measured and monitored by senior management. |
In a decentralised organisation, inconsistent mandates across management and functional communities may result in a potential lack of process ownership and clearly assigned accountability. | SHV provides the Groups with consistent policies and control frameworks to bring clarity to the roles and responsibilities across the organisation - including the role of SHV. To remain a self-evaluating and fast learning organisation, Groups are also expected to implement a common approach by embracing the importance of process ownership and effective functional communities, which are the keys to staying in control. |
Financial risks
Risk description | How the risk is managed |
|---|---|
Failure to allocate capital to responsible / future-proof investments may have adverse effects on operating cash flow, overall financial position, the ability to attract capital, as well as on customers, suppliers, and employees. | SHV concentrates on both organic and inorganic business growth. Inorganic growth depends on identifying the right targets for the Groups and investing in sustainable, long term value propositions. ESG is becoming an ever more integral part of business performance. SHV works with the Groups to focus on how ESG should be reflected in strategy updates, delivery and development agendas, the rolling forecast, and investment proposals. Investment outcomes are also periodically assessed against the approved proposals, with learnings used to further improve the capital allocation process. |
Risks
Key risks
Challenges in the macro-economic / geo-political environment
Lack of sufficient agility to ensure future resilience
ESG expectations
Non-compliance with laws, regulations, and societal demands
Unable to attract & retain own workforce
Supply chain disruptions
Cyber crime
Occupational Safety
Organisational misalignment