Risks and uncertainties affect all business environments. Risk-taking is an essential part of business and a precondition for achieving adequate returns. The risk environment in which SHV is active, creates value and generates income is determined by both manageable risks and a number of external risks that are beyond SHV's control. The manageable risks include commercial, operational, financial, tax, compliance, regulatory and information technology risks, and the ability to recruit and retain employees.
The risks SHV faces, change constantly as the internal and external dynamics of the operating environments of the Groups change, especially in the continued uncertain and volatile global economic environment. To the extent possible, the likelihood and impact of possible events on SHV’s business are regularly evaluated by means of risk assessments. Taking into account the competitive environment, it is essential for SHV management to continue to devote attention and to take a proactive approach to internal and external developments and their consequences for the businesses in which SHV operates. Furthermore, an area requiring constant attention from all the Groups remains the challenge of recruiting, developing and retaining qualified and talented people to ensure ongoing successful performance as well as providing a safe working place. SHV has developed and rolled out a Business Support Framework (BSF) throughout the organisation. This BSF contains SHV's minimum control standards, and this framework is instrumental in supporting the monitoring of risks.
SHV’s profitability is further influenced by several other external risk factors. Geopolitical risks exist, for instance, where countries are having trade disputes or where the company owns assets in politically unstable countries, which are further compounded by potential problems related to terrorism, social unrest and the scarcity of vital resources. SHV operates in numerous countries, and as a result it has to deal with different legislation and regulations. This, together with the existence of differing business ethics in each country, results in an inherent increased risk that (local) legislation and regulations may not be fully complied with. It is therefore essential to maintain a well embedded ethics and compliance culture throughout the company. Governmental interference in business, changes in legislation, the continuing inequitable enforcement of regulations, and sudden changes in taxation and levies in several jurisdictions further add to risk and related costs. Populist government measures may also bear down on business. External risk factors also include economic factors such as inflation, changes in interest rates or commodity prices, sovereign debt crises, exchange rate policies and financial markets developments. On top of that, digital developments and cybercrime pose additional risks. For more information, please consult the Risk Management Paragraph in the Financial Statements.