Risk Management
Risks are associated with all business operations. Properly managed risks can lead to opportunities and value creation, while risks that are managed incorrectly can lead to damages and losses.
The ability to identify, evaluate, manage and monitor risks plays a central role in the management and control of Trelleborg’s business operations. The aim is to achieve the Group’s targets while applying well-considered risk-taking within set parameters.
Trelleborg serves a broad range of customers in a variety of industries and niches. The business has a wide geographic spread. The Group has operations in some 40 countries, sales are conducted in just over 140 countries worldwide and manufacturing operations are carried out at about 100 production sites. The business is diversified geographically and across a range of different industries, which provides Trelleborg with an effective underlying risk spread.
Demand for the Group’s products and solutions largely moves in line with fluctuations in global industrial production. With the divestment of the tire operation, the Group has become less cyclical since there are distinct seasonal effects especially in agriculture. The Group focuses on industries and geographies with healthy growth that can report consistent earnings even when adverse cyclical fluctuations occur in individual industries.
Risks
Trelleborg has chosen to group the risks into four areas.
Sustainability risks run as a common thread through these areas and relate to climate impact, work environment risks or risks in the area of human rights. It also includes the risks relating to failure to comply with laws and rules, both as a Group and among the Group’s suppliers.
| Risks |
Focus
|
Management and main activities
|
| Violation of laws and permits | Compliance with applicable legislation | The Compliance Task Force leads and coordinates initiatives in this area. Training seminars are arranged, including competition law and the EU’s General Data Protection Regulation (GDPR). There is an established process for export control with a focus on embargoes and trade restrictions, and there are procedures, for example, for approval of membership in organizations and approval of collaborations with third parties. Regular legal reviews are conducted with a focus on monitoring and ensuring compliance in the Group companies. The Group’s internal controls, which are focused on regulatory compliance, have been both expanded and formalized over the past few years. During the year, the export control process was intensified with a particular focus on developments in sanctions against Russia, Belarus and China. Each business area has added further local resources during the year to review exports. |
| Corruption and fraud | Measures preventing fraudulent conduct | Established policies and procedures form the basis of the work in this area, which is supplemented with routine training and acceptance letters, signed yearly, for the relevant employees. Trelleborg’s Whistleblower Policy also entitles all employees to report any suspected legal or regulatory violations without repercussions. Review and evaluation of agency and distribution agreements are regularly conducted. Policy Quick Guides are in place to further increase the distribution and comprehension of regulations and the Group’s core values. In addition, continuous training is arranged, both on site and via e-learning. During the year, nearly 1,000 employees completed the Anti-Bribery and Corruption course. |
| Risks in the area of human rights | Child labor/forced labor in the supply chain | Supplier reviews and supplier audits in the areas of risk are conducted based on the Group’s geographic and materials risk assessments. |
| Risks | Focus | Management and main activities |
| Work environment risks |
Health and safety | Risks in the area of health and safety are managed via the Safety@Work program. Issues concerning employees are otherwise monitored as part of compliance with laws and codes and diversity & inclusion. |
| Products in environments with elevated risk levels |
Review of products and solutions |
Not only risk assessments but also training and workshops are conducted to identify products and contracts where it is especially important that the products comply with the quality and functional requirements necessary in extremely demanding environments – for example, marine infrastructure, marine hoses for oil and gas, healthcare & medical, and aerospace. Contracts and processes concerning production and project management are also subjected to legal review and risk assessment. |
| Inadequate and inappropriate agreements |
Examination of agreements |
Not only comprehensive training, but also internal and external legal reviews of contract issues and evaluation of contracts in prioritized areas. AI-based tools are used to review and assess risks in agreements in certain industrial segments. |
| Negative environmental impact |
Review of the sites’ local environment and focus on hazardous materials and chemicals | Environmental risks are identified in conjunction with all new construction and all acquisitions, with a focus on chemicals management, emissions to air, rainwater and the risk of floods. Sites that are susceptible to risk are routinely monitored. The Global Chemical Task Force leads the work to phase out and replace substances that are considered harmful and actively monitors developments in materials and chemicals legislation. In addition, environmental management systems and ISO 14001 certification are used to achieve greater standardization of analysis and control. |
| Risk of injury at sites | Protection of critical sites | External and internal analyses of the Group’s operations are carried out with regard to the most critical sites. Also a more in-depth mapping of natural disaster risks is made, with a particular focus on flooding and wind effects, including such risks that are related to climate change. During the year, a new control program was launched based on systematic self-assessment, how units comply with the Group’s guidelines for property and business interruption risks, and follow-up with internal and external audits. There are guidelines for new construction and upgrades of risk-classified sites. The number of such sites upgraded to Highly Protected Risk (HPR) has increased over the past few years. One aim is to improve the lowest performing and most critical sites. |
| Disruptions to critical IT systems | Minimize disruptions | IT infrastructure service levels and security are in focus, as is the implementation of Group-wide upgrades in a structured and secure manner. During the year, safety work was intensified in a number of areas. With regard to the user interface, security has been enhanced via multi factor authentication (MFA), and also in terms of more general systematic monitoring of internet traffic. Ensuring compliance with legal requirements in the countries in which the Group operates is an important part, as is information security within and among the systems. |
| Risks | Focus | Management and main activities |
| Commercial failures | New product segments, major projects and acquisitions |
In conjunction with all acquisitions, there is a due diligence program covering the areas of finance, operations and legal. New products in selected segments such as healthcare & medical finance, operations and legal. New products in selected segments such as healthcare & medical and aerospace are approved centrally before development work begins. For the past few years, there has been increased business support when establishing new product segments and for larger projects concerning liability risk management, legal risks and new establishments of operations. |
| Climate risks | Adaptation of production and products | Climate and other environmental issues drive local legislation and political instruments, and Trelleborg adapts itself to these in the relevant production countries. At the same time, several of the Group’s products and solutions help to reduce atmospheric emissions and protect society from climate change. Work aimed at reducing the Group’s fossil-fuel dependence was intensified during the year with respect to both own products and production resources. |
| Reduction of CO2emissions |
In 2023, the Group adopted new climate targets, committing to halve its direct and indirect CO2 emissions (Scope 1 and 2) by 2030 compared to the base year 2021, and during the same period reduce emissions along the value chain (Scope 3) by 25 percent. During the year, the new targets were reviewed and validated by the Science Based Targets initiative (SBTi), meaning that they are in line with the Paris Agreement’s goal of limiting global warming to 1.5°C. For many years, energy efficiency has been the focus of the Manufacturing Excellence program. |
|
| Political risks | Geopolitics and sanctions |
Trelleborg has discontinued its operations in Russia and does not do business with Russia or Belarus. What remains of the former business is now a dormant Russian company, with no operations. The liquidation of this company is set to be initiated in first half of 2024. The geopolitical situation is being monitored and is taken into account in all business plans.The purchasing functions continue to work on securing alternative suppliers and now also with a greater focus on geographical diversification. |
| Supply chain disruptions |
Material shortages and delays |
During the year, global supply disruptions and supply chain impacts have normalized and the effects of the coronavirus pandemic and the war in Ukraine, among other factors, have diminished. The Group has well-established tools in place to ensure parallel supplies and evaluates and balances purchasing between local, or global, suppliers, which limits disruption. |