Operational risks

Reorganisations

Many reorganisation projects (amongst others, centralisation of back office activities, closure of breweries and other rightsizing and downsizing activities) have been realised, are underway or are in preparation. Highest impact is in the supply chain, wholesale business and support functions in Europe and Americas. The risk is that due to social unrest, the production quality and supply continuity would be affected, which might negatively impact financial performance and Company reputation. The operating companies concerned manage reorganisation projects with care; the right speed, alignment with relevant industrial and external relations and consistent communication to employees.

Contingency plans have been put in place and clear targets are set on achieving the main change objectives. Since allocating sufficient management attention to the many reorganisation projects in addition to managing the regular business is considered critical, priority setting is monitored closely. Risk management structures are overall well embedded, however, further structuring is required.

Acquisitions and business integration

In the pursuit of further expansion, Heineken seeks to strike a balance between organic and acquired growth. In recent years, Heineken has been very acquisitive, with smaller transactions in mostly emerging markets and the S&N acquisition. In any acquisition, Heineken is faced with different cultures, business principles and political, economic and social environments. This may affect corporate values, image and quality standards. It may also impact the realisation of long-term business plans, including synergy objectives, underlying the value of newly acquired companies. Due to the relative size of S&N, specifically any risks materialising from this transaction could have a significant impact on Heineken.

In order to mitigate these risks, Heineken continuously improves its business development and integration activities, which includes significant involvement by relevant Group departments, operating companies and regional management in carrying out effective due diligence processes and preparing take charge and integration plans. Heineken has best practice programmes in place for acquisition and integration processes, which includes the adaptation to the Heineken Common Systems.

Supply continuity

Discontinuity of supply of our products could affect sales and market shares. This is not considered a major risk due to the relative size and spread of operations. An exception is the supply of beer products from the Netherlands to the USA, one of Heineken’s most profitable markets. Heineken Netherlands Supply is in the process of implementing a more structured Business Continuity Management System focusing on the supply to the USA. Securing timely supply of raw and packaging materials is strongly coordinated by our central purchasing discipline. Securing supply of fast-growing innovations like DraughtKeg is considered critical, since we also depend on partnerships.

Information security

Heineken’s worldwide operations are increasingly reliant on information systems. Heineken has a strict information security policy to ensure confidentiality, integrity and availability of information and to guarantee IT control. Structured compliance monitoring is in place by self-assessments and audits. The increased attention for Information Security and IT Control has a positive impact on the compliance level with the policy, the awareness of IT risks, and the measures to mitigate these risks. The increased centralisation of IT systems allows central enforcement of security measures across Operating Companies, but the impact of any security incident will also be much larger and requires strict monitoring.