GLOBAL RISK IDENTIFICATION AND MANAGEMENT PROCESS

Danone has organized its risk identification and risk management system around two complementary processes:

#1 - The identification and management of operational risks, under the responsibility and monitoring of the Internal Control Department.

This process focuses on risks related to the Company’s current activity and to deficiencies identified by the internal control review. It relies on a local standardized mapping at the level of each operating unit. Deficiencies are classified based on two categories qualifying (i) their potential financial impact on the Company; and (ii) the expected difficulty in resolving the deficiency under consideration. This mapping may then be used at different levels of the organization to help prioritize action plans to be implemented to reduce the identified risk.

#2 - The identification and management of strategic risks, under the responsibility and monitoring of the Strategic Planning Department.

This second process focuses on strategic risks. This risk mapping is prepared and updated semi-annually using the following methodology:

  1. identification of material risks by Danone’s Divisions with support from the main corporate transversal functions and integration of systemic risks not perceptible at the subsidiary level; 
  2. consolidation of Divisions’ major risks at Company level and integration of systemic risks not perceptible at Division level;
  3. ranking of risks based on their likelihood of occurrence and estimated financial impact, at the level of a Division or the Company;
  4. determination of preventive or corrective actions, which may be local or global depending on the case.
     

This process is an integral part of annual strategic planning. The strategic plan for each Division starts from the previous year’s mapping of strategic risks. It results in the development of the new mapping with related preventive actions.

Validation of most significant risks

A mapping of Danone’s major risks and risk mitigation plans is presented twice a year by Danone’s Head of Strategic Planning to the Danone Chief Executive Officer and Chief Financial Officer for review and assessment. This work serves as the basis for the presentations made to Danone’s Executive Committee and Audit Committee of the Board.

Other elements of Danone’s organization that contribute to risk identification and analysis

In addition to the two processes described above, some departments also deploy specific procedures and initiatives (training, risk prevention and protection…) contributing to the identification, the analysis and the mitigation of Danone’s risks. 

For more information on Danone’s risk identification and management processes and governance refer to section 2.8 of our 2018 Registration Document.

FOCUS ON SUSTAINABILITY RISKS AND OPPORTUNITIES ASSESSMENT

Among the existing additional risk assessment processes, Danone performed a sustainability risks and opportunities mapping which is presented below. The purpose of this risk assessment was to determine the sustainability topics on which we must communicate but also to help prioritize sustainability topics as part of the Corporate risk identification and management processes.

Methodology

To perform the assessment, we relied on the following four-step process:

  1. Risks identification through a comprehensive documentary search considering a broad scope of risks with impacts on Danone’s activities, on the environment, on the society… and considering different time horizons (short, medium, long). This search was carried out relying on work done for our materiality analysis, on benchmarks, on existing CSR reporting standards and existing internal risk assessments. Nine main categories of risks were identified: (i) Nutrition & Health, (ii) Responsible procurement and Human Rights, (iii) Food safety, (iv) Human Resources, (v) Reputation, (vi) Governance, (vii) Business Ethics, (viii) Environment and (ix) Security.
  2. Assessment of risks severity through work sessions with internal experts. Each risk was assessed considering its source (Company’s activities, suppliers’ activities…), external and internal trends, as well as underlying financial, regulatory, physical, organizational and reputational risks to determine an overall risk level. Risks were then mapped and prioritized according to their overall risk level and their likelihood of occurrence.
  3. Consolidation of final risks mapping by selecting for each of the 9 categories the 2 to 3 main significant risks.
  4. Validation by the sustainability governance of Danone which relies on Danone’s Sustainability Integration Committee, the Social Responsibility Committee of the Board and the Audit Committee.

 

Alignment with Danone’s Corporate risk identification and management process

The full process of sustainability risk assessment was coordinated by the Sustainability Integration Department and supported by the Strategic Planning Department. Thanks to this collaboration, the identification and assessment process was built relying on the strategic risk mapping tools and methodology.


Once the list of sustainability risks was established, it was reviewed by the Strategic Planning Department to see whether some of the risks could contribute to the Corporate risk mapping.

 

LIST OF DANONE’S RISKS

For more information on Danone’s principal risks and management system, refer to section 2.7 Risk factors of our 2018 Registration Document.