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measure and monitor the processes and report results ... - Refresco.de

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Business review 2010<br />

Risks related to production contingency<br />

<strong>Refresco</strong> continues to invest significant sums of money in its<br />

production sites. Toge<strong>the</strong>r with a leading insurance broker,<br />

we have rolled out a program to continuously improve housekeeping<br />

<strong>and</strong> fire protection <strong>and</strong> mitigate business interruption<br />

risks. We have, for example, invested in sprinkler installations<br />

in key plants <strong>and</strong> will extend this to more of our plants in 2011.<br />

Because of <strong>the</strong> number of plants in <strong>the</strong> group, we are able to<br />

produce nearly every individual stock­keeping unit (SKU)<br />

at at least three different locations, which helps us to secure<br />

continued supply to our customers even if <strong>the</strong> worst­case<br />

scenario materializes.<br />

Financial risks<br />

In addition to <strong>the</strong> above, <strong>Refresco</strong> is exposed to various risks<br />

arising from our financial operations <strong>and</strong> <strong>results</strong>. These risks<br />

relate to such matters as:<br />

•<br />

•<br />

•<br />

•<br />

•<br />

•<br />

<strong>the</strong> impact of changes in share prices, interest rates <strong>and</strong><br />

life expectancy on net pension liabilities<br />

maintaining group cash flows at an appropriate level<br />

<strong>the</strong> impact of interest rate movements on <strong>de</strong>bt <strong>and</strong> cash<br />

positions<br />

<strong>the</strong> impact of currency movements on <strong>the</strong> Group’s earnings<br />

<strong>and</strong> on <strong>the</strong> translation of its un<strong>de</strong>rlying net assets<br />

market liquidity <strong>and</strong> counterparty risks<br />

behavior of banks <strong>and</strong> credit insurers<br />

O<strong>the</strong>r risks<br />

<strong>Refresco</strong>’s businesses are exposed to varying <strong>de</strong>grees of risk<br />

<strong>and</strong> uncertainty related to o<strong>the</strong>r factors, including competitive<br />

pricing, consumption levels, physical risks, legislative, fiscal,<br />

tax <strong>and</strong> regulatory <strong>de</strong>velopments, terrorism <strong>and</strong> economic,<br />

political, <strong>and</strong> social conditions in <strong>the</strong> environments where we<br />

operate. All of <strong>the</strong>se risks could materially affect <strong>the</strong> Group’s<br />

business, revenue, operating profit, net profit, net assets<br />

<strong>and</strong> liquidity. There may be o<strong>the</strong>r risks that are unknown to<br />

<strong>Refresco</strong> or that are currently believed to be immaterial. As far<br />

as tax risks are concerned, in 2009 we started working with<br />

<strong>the</strong> Dutch tax authorities on a program called “horizontaal<br />

toezicht”. This involves <strong>de</strong>veloping <strong>and</strong> implementing a tax<br />

strategy <strong>and</strong> tax control framework that enable <strong>the</strong> tax<br />

authorities to become more proactive <strong>and</strong> real time, <strong>the</strong>reby<br />

significantly reducing historical tax risks for <strong>the</strong> company.<br />

Insurance<br />

As a multinational group with a broad product range <strong>and</strong><br />

operations in eight countries, <strong>Refresco</strong> is subject to varying<br />

<strong>de</strong>grees of risk <strong>and</strong> uncertainty. It does not take out insurance<br />

against all risks <strong>and</strong> retains a significant element of exposure<br />

to those risks against which it is insured. However, its business<br />

assets in each country are insured against insurable risks as<br />

<strong>de</strong>emed appropriate. It is insured against key risks like fire,<br />

business interruption <strong>and</strong> product <strong>and</strong> general liability.<br />

Internal Control <strong>and</strong> Reporting Procedures<br />

During 2010 we continued with <strong>the</strong> internal audit procedures<br />

supported by KPMG, which were started in 2008. These<br />

procedures play a key role in providing an objective view <strong>and</strong><br />

continuous reassurance of <strong>the</strong> effectiveness of risk management<br />

<strong>and</strong> related control systems throughout <strong>Refresco</strong>, to both<br />

business unit management <strong>and</strong> <strong>the</strong> Executive Board. The Group<br />

established an in<strong>de</strong>pen<strong>de</strong>nt audit committee, comprised entirely<br />

of Supervisory Board members, which supervises internal<br />

control <strong>and</strong> <strong>report</strong>ing procedures. <strong>Refresco</strong> has a comprehensive<br />

budgeting <strong>and</strong> monthly <strong>report</strong>ing system with an annual<br />

budget approved by <strong>the</strong> Executive <strong>and</strong> Supervisory Boards.<br />

Monthly <strong>report</strong>ing routines are used to <strong>monitor</strong> performance<br />

against budget <strong>and</strong> previous year.<br />

It is <strong>Refresco</strong>’s practice to bring newly acquired companies into<br />

<strong>the</strong> Group’s governance procedures as soon as is practicable,<br />

<strong>and</strong> in any event, by <strong>the</strong> end of <strong>the</strong> first full year of operation.

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