Risk management

Ensuring effective risk management

Risk-taking is an integral part of successful business activity. By carefully balancing our objectives against the risks we are prepared to take, we strive to conduct business operations in a socially responsible and sustainable manner.  

Effective risk management is key to achieving Marel’s objectives in regard to efficacy and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations. 

The Board of Directors oversees the risk management process, approving the risk appetite and evaluating the key risks on an annual basis, or more frequently in the event of unexpected changes to the risk environment. This serves to ensure that risk exposure remains consistent with Marel’s strategy, business and regulatory environment, and stakeholder requirements.  

Risk management process

Marel has a robust risk management process that consists of five steps: 

Risk appetite sets out the amount of risk the company is willing to accept in pursuit of value. 

Risk assessment involves mechanisms and analysis to identify risks. Risks are ranked by the likelihood of their occurrence and the magnitude of their impact. 

Risk treatment is the process of selecting and implementing measures to minimize the probability of identified risks materializing and to alleviate their potential effects. 

Monitoring is the process of evaluating the effectiveness of actions taken to mitigate the identified key risks. 

Communication involves informing the Board, top management, risk managers, and other stakeholders on risk on a recurring basis. 

Risk categories

Marel’s activities expose the company to a variety of risks, which are grouped in five categories: strategic, operations, financial reporting, compliance, and sustainability. 

Each category has sub-categories that can be defined broadly as follows

Key risks

Our management has identified certain key risks to our business that demand attention. Of these, seven key risks are discussed below, together with an overview of corresponding mitigative actions.

Profit and earnings volatility risk

Our operational results are subject to volatility. Factors like increase in competition, geopolitical conflicts, trade restrictions, and natural disasters might influence our ability to predict revenues, costs, and expenses affecting our growth objectives.  

Our business model with revenue streams generated by different industries, geographical areas, and product mix allows us to achieve and maintain strong profitability throughout economic cycles.  

Innovation risk

Changes in technology, failure to understand customer needs, inability to enforce intellectual property rights, etc. can affect our expansion objectives. Our success depends on our ability to develop and successfully introduce new products in addition to ensuring the competitiveness of existing ones, including solutions and software.  

Marel will continue to lead the innovation game in the food processing industry by committing significant resources to support its ambitious innovation objectives. 

People management risk

A high turnover rate, disengaged employees, gaps in workforce skills or misalignment of those skills with the company’s needs, an inadequate succession plan, etc. can harm our business. Workplace instability, absenteeism, and additional stress caused by the global pandemic, coupled with changing global workforce preferences, further increase the risk of effective talent management. 

Marel remains a desirable place to work that attracts and retains talented employees. Throughout the pandemic, we have implemented initiatives to maintain motivation and engage with our workforce in a personal manner. Marel is proactive in adapting its policies to align with current global trends. 

Supply chain disruption risk

As a manufacturer of leading technology solutions, we rely on the timely supply of inputs, as well as continued supply of scarce resources. The global pandemic caused instability in commercial transport and saw an increase in the demand of raw materials. This can lead to increased costs as well as delays to customer delivery. 

Marel makes use of its global footprint to mitigate supply chain risks, while continuing to adopt new supply chain technologies. Deliberate mitigations include the increasing of inventory levels, as well as identifying substitute suppliers. The company remains agile and proactive when prioritizing its manufacturing needs.  

Reputation and compliance risk

Marel operates worldwide and needs to comply with numerous and changing laws and regulations. Failure to comply can lead to penalties and adverse publicity. The evolution of social media further increases the risk of reputational damage.  

Marel strives to preserve and enhance its brand value, build resilience, and create emotionally connected customers, employees, and stakeholders, while complying with all industry, regulatory, and other general standards of significance. 

Information security risk

Failure to secure our information systems and data could result in operational disruptions, financial losses, reputational damage with existing and new customers, etc.  

Marel continues to invest in new facilities and infrastructure and in upgrading existing ones to ensure their integrity and availability in case of adverse events. 

Foreign exchange risk

As an international company, Marel is exposed to foreign exchange risk arising from various currency movements, primarily with respect to the EUR/USD exchange rate for revenues and EUR/ISK rate on the cost side.  

Marel takes advantage of natural currency hedges by matching revenues and operational costs as economically as possible. The company’s funding is denominated in its main operational currencies to create natural hedging in the balance sheet. Where necessary, financial exposure is hedged in accordance with Marel’s policy on permitted instruments and exposure limits.