2009 - Jaarverslag

CORPORATE INFORMATIONbodies, in particular defence forces and fire brigades. Demand forgeotextiles and synthetic turf products is driven by public sectorinvestments in infrastructure and sports facilities.Factors which determine government policy in the above marketsinclude security policy and economic growth. Strong commercialnetworks and the associated information provision make it possibleto anticipate government plans promptly and efficiently.As a result of flexibility in cost structures, it is possible to compensatefor the consequences of a certain degree of reduction in demand.This flexibility is achieved among other things by flexible deploymentof labour and partial outsourcing in some market groups.Raw materialsA limited number of raw materials determine a large part of thematerials consumed by the TenCate companies. This concerns inparticular aramid fibres and differentiating gradations of polyethyleneand polypropylene.Prices in the commodity market may fluctuate widely. The price ofplastics is determined partly by the oil price, but in particular byshortages or surpluses in the market.Price rises can be passed on to customers with a time lag of one to sixmonths. The same applies to price reductions. In some cases anautomatic price adjustment clause is included in customer contracts.In the case of super-strength or fire-resistant armour fibres, regularshortages occur or a strong dependence develops on a single supplier.These entail risks of availability and disproportionate price rises.Active efforts are being made to reduce this dependence by usingalternatives. TenCate operating companies will increasingly take partjointly in negotiations with major suppliers, in order to achieveoptimum conditions in terms of price, quality and delivery reliability.OPERATIONAL RISKSManagement and personnelTenCate’s organisation strategy is based on a decentralised model.The group directors and operating company managements determinethe company policy to a large extent independently and takeentrepreneurial decisions.Not having the right man or woman in the right place can result in anoperating company rapidly losing its lead or even falling behind itscompetitors. For this reason the selection criteria for new managementpersonnel have been tightened up, with an assessment forming part ofthe key management recruitment procedure.Another risk is dependence on key officers, often with an R&D ormarket background. It is necessary to ensure that this expertise isretained and shared across the organisation. This is achieved byguaranteeing knowledge.Production and product liabilityTenCate has various small- to medium-scale production processes,for example involving fewer than 100 employees. Where there is arelatively low degree of production automation there is a higher risk ofhuman error. Incidents in production can never be ruled out. These maylead to a loss of quality in the end-products, claims from customers oreven a temporary halt in the production process. However, TenCatecarries out preventive inspections of its products and almost all plantsare ISO-certified. Control of production processes and qualitymanagement are important priorities in order to avoid product claims.In that context, uniform sales conditions are being introduced as far aspossible.62Royal Ten Cate