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Business review 2009<br />
Governance<br />
<strong>Refresco</strong> is committed to run its business with integrity. The governance structure that is <strong>de</strong>scribed in this chapter<br />
reflects how the group is directed and controlled, suiting the interests of its business and stakehol<strong>de</strong>rs. As entrepreneurship<br />
is one of <strong>Refresco</strong>’s most important core values, a certain level of risk taking is part of our nature and is<br />
consi<strong>de</strong>red to be unavoidable when doing business. In this section we <strong>de</strong>scribe possible risks on multiple levels<br />
and how we manage the <strong>de</strong>scribed risks.<br />
Risk management and internal control<br />
A simple <strong>de</strong>finition of risk management is the process of<br />
un<strong>de</strong>rstanding and managing the risks that an organization<br />
inevitably is subject to in attempting to achieve its corporate<br />
objectives. <strong>Refresco</strong>’s risk management and internal control<br />
systems are set up to mitigate the uncertainties that we face,<br />
therefore improving conditions for achieving our objectives.<br />
The following risks can be distinguished.<br />
Strategic risks<br />
<strong>Refresco</strong> may not be able to fully implement its strategy<br />
or achieve the set objectives due to the global financial and<br />
economic situation.<br />
The global economic downturn has impacted economies and<br />
markets in which we operate. Therefore <strong>Refresco</strong> was subject<br />
to a number of risks that might impair our ability to fully<br />
implement our strategy or achieve the set objectives. The<br />
liquidity crisis was limiting the availability of credit, which had<br />
a negative impact on the execution of our inten<strong>de</strong>d acquisition<br />
strategy. <strong>Refresco</strong> realized that to stay healthy and further<br />
strengthen our competitive position in this economic situation,<br />
short-term measures nee<strong>de</strong>d to be taken. To reduce costs in<br />
2008 and 2009 we have reduced working capital significantly.<br />
As a result the cash position of the company remains strong and<br />
working capital control remains tight.<br />
Operational risks<br />
<strong>Refresco</strong> faces risks of economic downturn reducing<br />
sales and/or margins<br />
A large part of <strong>Refresco</strong>’s revenue comes from economies<br />
that are severely affected by the unprece<strong>de</strong>nted economic<br />
slowdown. This has adversely impacted consumer markets<br />
and changes in consumer behavior. <strong>Refresco</strong>’s business is<br />
largely <strong>de</strong>pen<strong>de</strong>nt on continued consumer <strong>de</strong>mand, and less<br />
consumer spending may reduce the sales of our products with<br />
clear implications for revenue and profitability. Last year’s<br />
experience <strong>de</strong>monstrated that the private label soft drink and<br />
juice market is less sensitive to an economic downturn than<br />
other Fast Moving Consumer Goods (FMCG) markets. However,<br />
the margin pressure of our retail customers is stronger than<br />
ever. Within our strategy we aim at a broad portfolio: on<br />
product level, as in customer portfolio, as well as geographical<br />
spread to mitigate risks caused by the negative effect of one<br />
category. <strong>Refresco</strong> closely monitors performance in the most<br />
volatile markets as well as customers and suppliers, and is<br />
able to respond quickly in an effort to protect its business.
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