2011 Annual Report - Cargills (Ceylon)

Annual Report 201119Risk management contd.People capabilitiesOur greatest asset is our employees. It is critical to our successto attract, retain, develop and motivate the best people withthe right capabilities at all levels of operations. We reviewour people policies regularly and are committed to investingin training and development. We also carry out successionplanning to ensure that the future needs of the business areconsidered and provided for. There are clear processes forunderstanding and responding to employees’ needs throughHR initiatives, staff surveys, and regular communication ofbusiness developments.Reputational RiskFailure to protect the Group’s reputation and brands could leadto a loss of trust and confidence. This could result in a declinein the customer base and affect the ability to recruit and retainhigh-calibre people. Emotional loyalty to the Cargills brandhas helped us diversify into new areas of businesses throughintegration and diversification strategies. We recognise thecommercial imperative to safeguard the interests of all ourstakeholders and avoid the loss of such loyalty. The ‘CargillsValues’ are embedded in the way we do business at every level.Our Code of Ethics guides our relationships with customers,employees and suppliers. We engage with stakeholders inevery sphere, take into account their views and endeavor todevelop strategy that reflects their interests.Product safetyThe safety and quality of our products is of paramountimportance to Cargills as well as being essential for maintainingcustomer trust and confidence. A breach in confidence couldaffect the size of our customer base and hence financial results.We have detailed and established procedures for ensuringproduct integrity at all times. There are strict product safetyprocesses in place and regular management reports. We workin partnership with suppliers to ensure mutual understandingof the standards required. We also monitor developmentsin areas such as health, safety and nutrition in order torespond appropriately to changing customer trends and newlegislation.Health and Safety risksProvision of adequate safety to our staff and customers is ofthe utmost importance to us. Injury or loss of life cannot bemeasured in financial terms. We operate stringent healthand safety processes in line with best practice in our outlets,manufacturing facilities and offices, which are monitored andaudited regularly.IT Systems and InfrastructureThe business is dependent on efficient Information Technology(IT) systems. We recognise the essential role that IT playsacross our operations in enabling us to operate efficiently. Wehave extensive controls in place to maintain the integrity andefficiency of our IT infrastructure and to ensure consistency ofdelivery. All relevant staff is effectively engaged to mitigate ITrelated risks through effective policy and procedures as well asincreased awareness.Regulatory and Political EnvironmentDue to the diverse nature of our businesses we are subject toa wide variety of regulations prevailing in the country. Weconsider these uncertainties in the external environment whendeveloping strategy and reviewing performance. We remainvigilant to future changes. As part of our day-to-day operationswe engage with governmental and non-governmentalorganizations to ensure the views of our customers andemployees are represented and try to anticipate and contributeto important changes in public policy whenever possible.Funding and LiquidityThe Group finances its operations by a combination of retainedearnings, long term and short term loans. The objective is toensure the continuity of funding and to arrange funding aheadof requirements and to maintain sufficient undrawn committedbank facilities. We as a Group maintain a portfolio of bankinginstitutions to cater to the funding requirements and to obtainthem on favorable terms. Healthy relationships with bankersallow us to have borrowing arrangement within a shorterperiod of time.Interest rate riskIt is the Company’s objective to limit its exposure to increasesin interest rates while retaining the opportunity to benefitfrom interest rate reductions. Accordingly the Group managesinterest rate fluctuations with an appropriate mix of fixed andvariable rate debts through a centralized treasury managementfunction.Credit riskThe Company aims to reduce the risk of loss arising from defaultby parties to financial transactions. Risk of default is routinelymonitored and required actions are taken. Our manufacturingsubsidiaries are more exposed to credit risk by the very natureof their business and this risk is neutralised through a rigorousprocess of credit management.Foreign Exchange Rate RiskThe Group’s exposure to this risk is minimal as exportsare negligible. Risk on imports of plant, machineries andequipments are managed adequately.