Annual report 2011 - Trelleborg

Moreover, because selected parts of risk
management activities are Group-wide,
the central Group resources can be allocated
to prioritized risk focus areas.
Group Treasury is responsible for
financial risk management activities.
The unit is in charge of Group companies’
external bank relations, liquidity
management, net financial items,
interest- bearing liabilities and assets,
Group-wide payment systems and netting
of currency positions. Centralization
of the Group’s treasury management
ensures substantial economies of scale,
lower financing costs, tight management
of the Group’s financial risks and
improved internal control.
Trelleborg’s Treasury Policy defines
the financing operation’s purpose, organization
and distribution of responsibility,
and also prescribes a framework for
financial risk management activities.
The Finance Committee of the Board of
Directors reviews the Treasury Policy and
proposes changes annually, or more
frequently if necessary, after which the
Treasury Policy is adopted by the Board.
Trelleborg’s Treasury Policy states,
among other things, that decisions on
foreign exchange hedging of operating
cash flows shall be made by the respective
business areas in cooperation with
Group Treasury, which manages hedging
activities centrally. All foreign exchange
transactions of Group companies must
be conducted in conjunction with Group
Treasury, which ensures that the Group’s
hedging activities are carried out in compliance
with the Trelleborg’s Treasury
Policy. Group Treasury continuously monitors
key figures related to the Group’s
capital structure and forecasts for the
Group’s liquidity reserve are reviewed on
a monthly basis.
Within the scope of Trelleborg’s
Treasury Policy, Group Treasury has the
option to conduct a certain level of proprietary
trading in currency and interestrate
instruments. Such trading generated
a profit in 2011.
Trelleborg’s risk management is
systematically monitored by Group management
using such tools as monthly
reports from the managers in charge in
which they describe developments within
their respective areas of responsibility
as well as identified risks. 2011 also
marked the introduction of new reporting
procedures for Enterprise Risk Management
and Corporate Responsibility in
which the Group’s consolidation system
plays a decisive role. The Group’s
General Counsel reports on a continuous
basis to the Audit Committee regarding
the Group’s risk activities and risk management
and the Group’s CFO reports
frequently to the Finance Committee
concerning the Group’s finance operations,
including financial risks and financial
risk management. Furthermore, the
President regularly provides the Board
with reports on the development of the
Group’s risks.
ERM priorities
2011
Within the framework of the ERM and
strategy processes, the focus of the Risk
Management staff function remained on
jumbo risks, meaning risks that can
result in damage or losses that may
have significant impact on the entire
Group and therefore motivate the risk
being handled from a Group perspective.
Risk management activities in 2011
continued to focus on the prioritized risk
area “Protection of sites that are of
critical importance for the Group’s
operations and earnings.” Specific action
plans to significantly raise the level of
protection were produced and implementation
of the measures commenced at
36 sites. Of these, eight facilities were
designated at the Highly Protected Risk
level, which is the highest risk classification.
The aim is to raise a further 11
sites to this level in the future.
In 2011, new reporting procedures
were introduced for Enterprise Risk
Management and Corporate Responsibility
in which the Group’s consolidation
system plays a decisive role. The Group’s
companies, business areas and business
units can use the system to systematically
identify, analyze and report risks.
This system is already in use in financial
reporting and for reporting of work involving
the internal control over the financial
reporting.
Activities in focus in 2012
Prioritized activities for 2012:
Implementation of the action plans
drawn up for sites aimed at significantly
raising security levels.
Risk assessment of strategic
suppliers.
Focus on handling and storage of
chemicals at manufacturing sites.
Combating corruption and review
of Group-wide structures, including
consideration of the new UK Bribery
Act.
GOVERNANCE AND RESPONSIBILITY – RISKS AND RISK MANAGEMENT
Risk management processes for products
and solutions in environments
with elevated risk levels.
Strategic and operational
risks
Strategic and operational risks cover a
number of different risk. For example,
Trelleborg’s operations are influenced by
political decisions and administrative
regulations in some 40 countries in
which it operates. These include regulations
that apply to taxation and financial
reporting and legislation in the environmental
area. Trelleborg’s business is
also affected, for example, by natural
disasters, environmental impacts and
external financial risks. The ability to
attract and retain key personnel, the
acquisition and integration of new units,
divestments and structural measures
are examples of additional risks encountered
by Trelleborg.
Trelleborg’s focus on operational
risks primarily encompasses market
risks, costs risks, site risks, customerrelated
credit risks and IT risks.
Market risks
Trelleborg’s business and earnings are
exposed to market risks in the form of
the economy’s impact on demand for the
Group’s own products and solutions.
Demand for Trelleborg’s products and
solutions impacts delivery volumes.
The Group sells polymer-based products
and solutions to a very broad spectrum
of customers and sectors, with an
emphasis on industry in Europe, the US
and emerging markets. Demand for the
Group’s products and solutions largely
moves in line with fluctuations in global
industrial production. Demand can
generally be divided into three large
segments – general industry, capital-
intensive industry and light vehicles.
General industry comprises a large
number of products and solutions that
are critical to the function of all continuous
industrial processes and industrial
products, providing a direct link to industrial
business activity.
Demand in the capital-intensive
industry has greater emphasis on products
and solutions connected to major
industrial projects often of an infrastructural
nature. In capital-intensive industry,
the impact of fluctuations in demand has
a somewhat delayed effect, individual
orders are larger and delivery periods
are longer.
The demand scenario for the light
vehicles segment is characterized by
GRI: 1.2 Annual Report 2011 Trelleborg AB 29