Doing business inherently involves taking risks. By taking balanced risks we strive to continuously build on being a financially sound and sustainable company. Risk management is therefore an important element of our corporate governance and strategy development. Through our risk management initiatives, we seek to provide reasonable assurance that our business objectives can be achieved and our obligations to customers, shareholders, employees and society can be met.
We show the most significant risk factors which we have managed this year below. A graph is used to indicate how great the chance is of a risk occurring and the possible impact of the risk on our strategic ambitions. We also provide mitigating measures for the square ‘high impact’ and ‘big chance’. The overview is not intended to be an exhaustive list.
The following specific risks arose over the last year:
1 - Economic risk
Things are going better in the world from an economic perspective, which has made a limited positive contribution to the result.
2 - Political unrest
The level of political unrest has remained largely the same but specific political decisions have had a negative impact on sales. Last year we had a delay in our delivery to Algeria. Export opportunities were limited in Russia. Our international distribution has mitigated these risks.
3 - Changes in exchange rate
Major exchange rate fluctuations occurred over the last year but the small scope of our foreign asset position meant that these had a minimal effect on the company results.
4 - Talent management
The growth which is forecast makes the necessity of attracting talent a matter for attention. Work on the image and communication of HZPC Holding is taking place to assist in this.
5 - Protection products
As certain crop protection products can no longer be used, the challenge for growers increases in relation to the cultivation and storage of seed potatoes. This risk is being limited by alternative measures and guidance.
6 - Provision of information
Provision of information and protection: growth and further digitisation have increased the dependence on IT systems. Steps are being taken towards standardised, harmonised processes and integrated systems with an adequate infrastructure and back-up facilities. In addition, we are working on the replacement of the system and better security of the infrastructure
Risks which are always present and not specific to this reporting year:
7 - Seed potato diseases
The seed potato market is a global market. Our sales can be influenced by phytosanitary impediments and political factors. Disease risk plays an important part in breeding seed potatoes. Quarantine diseases in particular have a large influence on the availability of seed potatoes. The discovery of a quarantine disease at our breeding station or in our production area could seriously delay the development of new varieties and the sale of varieties which have already been produced.
8 - International commercial operations
Our operating profit is subject to credit risks. The financial position of the various buyers in politically unstable areas has definitely not become any less difficult or any easier to assess. For the coming period, a credit risk will continue to apply. However, this is no different than in other years. This remains a high risk, which could also have a serious impact. Where possible we have taken the following mitigating measures to counter this.
- We regularly use safeguards such as advance payments, LCs and bank guarantees.
- Credit limits are actively monitored throughout the season.
- Almost no new deliveries for the new season are allowed until all debts from the previous season have been paid.
9 - Complying with laws and regulations
HZPC Holding or her subsidiaries may be held responsible for any liabilities arising out of non-compliance with laws and regulations. As HZPC Holding, we do business in more and more countries that have juridical compliance processes with which we have to comply. The UK Bribery Act is an example of one such law with which HZPC Holding and also other international companies have to comply. We are fully aware that the risk of non-compliance with laws and regulations can damage our reputation and lead to serious legal consequences.
10 - Substitution risk
The chance of substitute products being developed, such as competing varieties or other parties producing potatoes from seed sooner and/or better, is present but we do not believe it represents a high risk in the short term.