Barilla Business Case

Barilla Business Case

Risk Management, Piano Strategico e Organi di GovernoMilano, Centro Svizzero

July 2nd, 2014

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Introducing myself – Matteo Vigo

Strictly confidential

‐ 38 years old, no kids, one wife…

‐ Citizen of the world

‐ I like sports and good wines

‐ Straightforward

‐ Very good moderator and diplomatic

‐ Increase capability to delegate and active listening skills

‐ Emphatic

‐ In Barilla since June 2010 as Risk Management Directorafter consultancy and banking institutions international experiences

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Today Agenda

• Barilla Company Presentation

• Enterprise Risk Management in Barilla

• Strategic Planning & Risk Management: the “hidden” Link

• Risk Disclosure to Top Management, Board and Statutory Auditors


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Today Agenda






BOZZA PER DISCUSSIONE

StoriaVision, Values and Strategy

“We consider the company’s position not as a personal privilege, but as a responsibility for the transmission of

values, behaviors and skills that must be nurtured over timefor the generations to come.”

Guido, Luca and Paolo Barilla

OUR VISION,ASPIRATION andSTRATEGY


StoriaBarilla Group today

“In business you live by plans. You live imagining the future.

Everything is done for the future.”

Pietro Barilla

2013 EMPLOYEES:8,100 people

2013 INVESTMENTS:141 million euro

2013 TURNOVER:3.2 billion euro

Barilla is the leader in the world pasta market, in pasta sauces in continental Europe, in bakery products in Italy and in crispbreads in Scandinavia

BARILLA GROUP TODAY

9 Subsidiaries with 30 Manufacturing Sites16 Commercial SubsidiariesMore than 100 Export Countries

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2

11

1

1

6

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BARILLA GROUP: OFFICES & PRODUCTION SITES

ParmaAltamuraAscoli PicenoCastelplanioCastiglione d. S.CremonaFerraraFoggiaGalliateMarcianiseMelfiNovaraRubbiano

Italy

16 Commercial Sites and 30 Pasta, Sauces, Bakery Production Sites and Mills

AustriaBelgiumCroatiaDenmarkFranceGermanyGreeceNetherlandsNorwayPolandSloveniaSpainSwedenSwitzerland

Europe

AustraliaBrasileCanadaGiapponeMessicoRussiaStati UnitiTurchiaSingapore

AustraliaBrazilCanadaChinaJapanMexicoRussiaSingaporeTurkeyUnited States

Rest ofWorld

MillsOffices Plants

BARILLA GROUP TURNOVER BY:

BUSINESS AREAS GEOGRAPHICAL AREAS

50%

50% 51%

29%

15%

5%

OUR BRANDS, OUR PRODUCTSBarilla holds 13 brands and manufactures 1.7 million tons of products per year


Good for You, Good for the Planet:Our way of doing business

“Give People food that you would give your own children.”

Pietro Barilla

GOOD FOR YOU, GOOD FOR THE PLANET

What the world calls «sustainability» for Barilla is a unique and distinctive way of doing business: Good for You, Good for the Planet.

This is a strong identity that expresses the Company’s contribution to the sustainable development of communities and the planet, an expression of scrupulous attention to the quality of products and processes that are carried out every day at Barilla.

FROM FIELD TO PEOPLE

DOUBLE PYRAMID MODEL

Developed in 2009, the Double Pyramid one of the most original contributions of the BarillaCenter for Food & Nutrition Foundation

The Double Pyramid shows how food for which consumption is recommended morefrequently is also the one that best preserves the health of our Planet

reformulated products since 2010 according to Double Pyramid principles

new products launched in 2013 in line with Barilla’s Nutritional Guidelines

FOOD PYRAMID: REFORMULATION OF EXISTING PRODUCTS AND NEW PRODUCTS

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Barilla’s Commitment: salt, fat and sugar reduction, no hydrogenated fats, wholegrain cereals increase

ENVIRONMENTAL PYRAMID: IMPACT REDUCTION OF OUR PRODUCTS AND PROCESSES

‐ 27% CO2 emission vs 2008

‐ 25% water consumptionvs 2008

‐ 7% energy consumptionper unit of finished product vs 2008

SUPPLY CHAIN PARTNERSHIPS AND TERRITORIAL COOPERATION

durum wheat purchased in Italy

through Cultivation Contracts

70%local durum wheat(cultivated in the

same country where pasta is produced)

87%

eggs from more than2 million cage‐free

laying hens

85%totally recyclable

sustainablepackaging

98%

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Today Agenda






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Risk is an integral part of doing business and can be defined as...“any uncertain event that could threaten the achievement of Business Objectives and Strategies or the company’s key value drivers”

Taking measured risks is therefore our business

Enterprise Risk Management in Barilla – Definitions & Scope

Our responsibility is to ensure that the current Group Risk Profile is consistent with our Risk Appetite and does not exceed our Risk Capacity, in order to achieve long‐term sustainable performances

Single Risks

Risk Profile (aggregation of single risks)

Risk Appetite(amount of risk the Group is willing to accept in pursuit value creation)

Risk Capacity(maximum risk that the firm could withstand and remain a going concern)

Always being able to check whether the Group risk profile is in line with our risk appetite


Enterprise Risk Management – Outside In View

Source: «Codice di Autodisciplina per le società quotate» 21

• Sets the Risk Appetite and its compliance to the company strategic objectives

• Evaluates the ERM framework and the Internal Control System and the effectiveness

Board of Directors

CEO

• Is the owner of the relationship with the Board of Directors: is in charge of reporting to the BoD the wide representation of the company risk profile allowing the Bod to check wheter the risk profile is in line or not with the already set risk appetite

• Is responsible for the ERM framework design and implementation

Vast majority of listed companies & multinationalorganizations are now provided with a central unit dedicated to the Enterprise Risk Management (CRO)


Enterprise Risk Management in Barilla – The CFO role

Enterprise Risk Management in Barilla – The CFO role

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ERM in Barilla – Current Status and Approaches


Top Management Prioritization

and Weaknesses Evaluation

Quantitative Risk Assessment

or

Qualitative Risk Assessment

Barilla Risk

Register

Group Strategic Initiatives

Maturity Level

Strictly confidential25

What• Being more aggressive, what does this mean?

‐ New Geographies‐ New Channels‐ New Products‐M & A‐ New Organization

How• In which way the Company Strategy and its aggresiveness (Risk Appetite)

are linked to Risk Management?

Enterprise Risk Management – The Risk Current Challenges

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Today Agenda






27Strictly confidential

Company Strategy and Risk Management – The Hidden Link

• Strategic Planning Double the Business by 2020

• Leverage Ratio Trend

• Impacts on the Risk Capacity & Risk Appetite

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Today Agenda





• Risks Disclosure to Top Management, Board and Statutory Auditors

ERM Process

Risk Response &

Control

Reporting

Measurement & Assessment

Monitoring Processes

Action PlanningMitigate, Accept, Transfer, Avoid

Multi – layered reporting on Risks:

‐ Critical

‐ High

‐ Medium & Low

Risk Identification SA session, Incidents, Audit activity & assessement via a uniform method

Matching between Risk Appetite and Risk Profile

Yearly Assertion by Top Management

Culture & Competence

Governance

ERM Strategy

Risk PrioritizationRisk Assertion & Monitoring

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ERM in Barilla ‐ Risk Register Risk Area Sub Risk Area

EXTERNAL CONTEXT RISKS FINANCIAL RISKSSTRATEGIC RISKS HUMAN CAPITAL &

ORGANIZATIONAL RISKSGOVERNANCE & INTEGRITY RISKS

REPORTING & COMPLIANCE RISKS

Nature of Risk

ICT RISKS

‐ Integrity‐ Access‐ Availability‐ Infrastructure

‐ External Financial Reporting

‐ Internal Management Reporting

‐ Internal Control System & Governance Evaluation

‐ Compliance to Laws and Regulations‐ Fiscal & Tax‐ HSE‐ Quality & Foodsafety‐ Corporate Criminal Liabilities

‐ Antitrust‐ Privacy‐ Labour & Social Contributions

‐ Other Local Regulations

‐ Competitor‐ Current Markets‐ New Business‐ Retailers‐ Supply Chain‐ New Products/Ingredients

‐ Customer Wants & Evolution‐ Trade Shoppers‐ Current Business‐ New Business

‐ Technological Innovation‐ Product‐ Process/Equipment

‐ Country Instability‐ Political/Government‐ Social‐ Financial

‐ Regulatory Evolution‐ Fiscal & Tax‐ HSE‐ Quality & Foodsafety‐ Labour & Social‐ Other Local Regulations

‐ Macroeconomic Context

‐ Intellectual Properties, Brands & Trademarks‐ Company Brand‐ Meal Solution Brand & Product Naming

‐ Bakery Brand & Product Naming

‐ Raw Materials‐ Technologies Product‐ Technologies Process

‐ Strategic Partnering / Joint Venture‐ Business JV‐ Product Mix‐ Technology‐ GDO

‐ Key Process Outsourcing

‐ Strategic Acquisitions (Investment Evaluation)

‐ Strategic Alignment

‐ Product Portfolio

‐ External Communication & Stakeholders Relations‐ Financial Stakeholders‐ Nutrition / Opinion Leaders / Scientific Communities

‐ Unions‐ Media / External Communities

‐ Other Regulators‐ Customers

‐ Shareholders

‐ Market‐ Interest Rate‐ Currency‐ Financial Counterparty‐ Financial Investment Portfolio

‐ Pension Fund‐ Liquidity & Payments‐ Capital Availability and Debt

Management / Cost‐ Commercial Credit &

Concentration

‐ Right Persons, Right Skills, Right Roles

‐ Internal communications‐ Succession planning‐ Human Capital Company

Attractiveness‐ Pay for Value‐ Talent Retention‐ Organizational Effectiveness

& Alignment

‐ Code of Ethics & Code of Conduct

‐ Policies & Procedures‐ Authority / Limit‐ Internal Fraud /Illegal Acts‐ External Fraud / Illegal

Acts

OPERATIONS RISKS

‐ Logistics‐ Warehousing‐ Transportation‐ Distributors Management

‐ Operations / Industrial Investments‐ Sourcing

‐ Raw & Pack Materials / Finished Product Materials Quality

‐ Availability / Alternatives‐ Raw Materials Price Volatility Mngt‐ Media Buying (Indirect)‐ IT (Indirect)

‐ Operations Business Continuity‐ Product Safety & Quality‐ Environmental‐ Asset Protection ‐ Security & Facilities‐ Employees Health & Safety


‐ Strategic Planning & Budget‐ Fiscal Planning & Tax

Management‐ Intercompany / Transfer Price‐ Contract Commitment

‐ Financial Covenants‐ Supply Chain‐ Trade / Retailers / Distributors

‐ Media Buying‐ IT

‐ Legal‐ Trade Relations & Promotions‐ Product Development / Time

to Market‐ Production Efficiency‐ Production Capacity /

Availability

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ERM in Barilla ‐ Risk Rating4 Rating Categories: Low, Medium, High and Critical

FreqSev Rare Unlikely Possible Likely Frequent Recurrent

Insignificant Low Low Low Low Low Medium

Minor Low Low Low Low Medium High

Moderate Low Low Low Medium High Critical

Significant Low Low Medium High Critical Critical

Major Medium Medium High Critical Critical Critical

Catastrophic Medium High Critical Critical Critical Critical


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ERM in Barilla ‐ Risk Assessment Process


Top Management Prioritization

and Weaknesses Evaluation

Barilla Business as Usual

Group Strategic Initiatives

The Enterprise Risk Management Output

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All identified risk events have been scored according to the Barilla risk assessment methodology

Yearly Risk identification sessions are performed through:

‐ one to one interviews with all Group Directors

‐ risk identification and assessment meetings with all direct reports (N‐2)

‐ One to one validation session with each organizational unit Risk Champion

The overall risk collection allows the Company Risk Profile shaping:

‐ Strategy @ Risk (7 issues, GLT members input)

‐ 11 Critical Risks

‐ 18 High Risks

‐ 50 Medium Risks

‐ 23 Low Risks

Single Risks

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Risk Management Output Disclosure


• CEO & GLT discuss about Company Top Risks in late September in order to define the risk based resource allocation within the BDG process (Mitigating Action Plans adequacy and funding)

• The Risk Management Output feeds the Audit Plan

• Board of Directors (CdA) is informed about this output once a year by the CFO

• Statutory Auditors receive periodical updates directly from Risk Management also contributing to steer the focus

• Lenders and Investors are informed about the RM process

Barilla Business Case

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