Integrated Risk Management Aon Global Risk Consulting Alex

Integrated Risk Management Aon Global Risk Consulting (Alex van den Doel) Van Gansewinkel (Doede de Waij )

Risk Management and financial impact Chemie-Pack (Moerdijk) § 45 employees § EUR 6, 5 m Revenu Fire on January 5, 2011 § Damage: EUR 71 million § Bankruptcy on August 25, 2011 2

Events can have huge impact! Company Event Value Reaction TEPCO Japan EQ -89. 6% - $ 37 bln Dexia Greek debt -87. 3% - $ 3. 9 bln Research in Motion Service Disruption -49. 7% - $ 6 bln BP Explosion / Oil spill -29% - $ 53 bln Apple Iphone Antenna -2. 4% - $ 6 bln Source: Aon / Oxford Metrica: Reputation Review 2012 § More than 50% value impact possible! 3

Objectives Integrated Risk Management (IRM) Protect: § Shareholder’s value § Financial objectives Set priorities Take more not less business risk! 4

Agenda § Integrated Risk Management – Film § Integrated Risk Management – Execution 1. Risk Rating and Maturity 2. Stress Test 3. Risk Bearing Capacity § Integrated Risk Management – In Practice – Case Study Van Gansewinkel – Doede de Waij § Wrap-up and Questions 5

Integrated Risk Management – Film 6

IRM Approach – Execution 1 A Annual update 2 A Risk Rating & Maturity Stress test 3 A Risk Bearing Capacity Calculate and substantiate how much a company can retain Identify main risk areas from a financial perspective (QUICK SCAN) Identify and quantify industry specific stress scenario's 1 B 2 B 3 B Risk Assessment Scenario analysis Risk Appetite Identify and assess most significant risks: strategic, operational, financial, compliance Analysis in detail of most severe scenario's impacting financial objectives Consultative Approach to determine how much a company wants to retain 4 Register Record and monitor risk developments online 5 Outsourcing Risk management activities delivered by external resources 6 Compliance Independently review risk management and financing measures 7 Risk Financing Optimize the Risk Financing structure and programmes 7

IRM Approach – Execution 1 A Annual update 2 A Risk Rating & Maturity Stress test 3 A Risk Bearing Capacity Calculate and substantiate how much a company can retain Identify main risk areas from a financial perspective (QUICK SCAN) Identify and quantify industry specific stress scenario's 1 B 2 B 3 B Risk Assessment Scenario analysis Risk Appetite Identify and assess most significant risks: strategic, operational, financial, compliance Analysis in detail of most severe scenario's impacting financial objectives Consultative Approach to determine how much a company wants to retain 4 Register Record and monitor risk developments online 5 Outsourcing Risk management activities delivered by external resources 6 Compliance Independently review risk management and financing measures 7 Risk Financing Optimize the Risk Financing structure and programmes 8

1 A) Risk Rating § Qualitative assessment of adequacy of: – Risk identification process – Risk management measures – Risk financing measures § Scope: – Balance Sheet and P&L – Enterprise-wide § Results – Risk Rating dashboard – Starting point for further analysis – Basis for monitoring progress effectiveness 9

1 A) Risk Rating 10

1 A) Risk Rating 11

1 A) Risk Rating 12

1 A) Risk Maturity Below average Risk Maturity Rating Insight Into Risk Maturity Ratings Globally Above average Comments for Improving Rating 13

1 A) Higher Risk Maturity adds value! 14

2 A) Stress Testing § Identify scenarios that can impact the financial objectives § Scenarios: – – – Industry specific (Aon Database) Company specific (desk study) Out-of-the-box scenarios (workshop) 15

Module 2 B – Scenario analysis § In-debt analysis of most critical scenarios § Approach – Determine most critical activities for strategy, value chain, sales, costs or liability risks – Workshops with internal and external experts – Event trees to determine financial consequences in detail § Very detailed insight in the impact of a critical scenario on the financial objectives § Insight and focus for improvement in risk management 16

Module 3 A – Risk Bearing Capacity § Quantify of the absolute maximum amount of risk the company is able to retain (Risk Bearing Capacity) § Approach – Analyse the company's financial strategy and policies (i. e. future CAPEX, dividend increase) > discussion Treasury / CFO – Select the most "constraining financial ratio's (from bank covenants, credit rating) – Develop a model for calculating risk bearing capacity – Calculate risk bearing capacity § Result – Definition and understanding of the company's risk bearing capacity and risk appetite 17

Integrated Risk Management - In practice Van Gansewinkel Groep Doede de Waij - Risk- & Insurance manager Doede. waij@vangansewinkel. com Phone: +31 40 751 44 45 18

About Van Gansewinkel Groep • Waste services, raw materials and energy supplier • Active across the entire waste chain • Annual revenues € 1. 1 billion • Nine countries • Market leader in the Benelux • Top 5 player in Europe • Approximately 5, 800 employees • 150, 000 customers • 1 million households 19

Our customer driven supply chain Energy from Waste 2 Ef. W plants – Rozenbrug & Duiven • Steam • Electricity • City heating Collection (c. 7 Mt) c. 2 Mt fuels Collection of household -, commercial -, & hazardous waste • 2, 000 vehicles Recycling (c. 5 Mt) • Coolrec (plastics / metals) • Maltha (glass) ~70% • VG Minerals (building mat. ) • VG Paper (office paper) 20

Risk management process Risk assessments Stress Test Assessment of the risks which: Financial analyses Review Maximum Possible loss (MPL scenario) What will be the impact of the various stress tests looking at: Liability Risk Quantification Our balance sheet Property, plant, equipment, inventories Intangible assets Contingent Liabilities Etc. Can decrease the total assets Can reduce the equity and/or increase the liabilities Can decrease our revenues and/or increase costs Business Impact Analysis Reputation assessment Can impact our cash flow Define worst case scenario’s Operational Risks Risk Management Risk Financing Fire / Natural hazards Fire protection system SHEQ Real estate Site surveys by insurers All risk policy (Property / machinery breakdown / business interruption) Road incidents Driver training / Driver coaching / Toolbox meetings Motor fleet insurance Land based equipment insurance Reputation risk Crisis management exercising and planning Emergency response teams Credit risk Prompt follow up by credit receivable department Terms & conditions Vendor screening Credit insurance for the paper division Financial fraud AO/IC procedures Fraud insurance Liability risk ( occupational incidents, product -, service delivery, etc) SHEQ procedures Employee training Terms and conditions Quality systems Maintenance systems Workers compensation insurance General liability insurance Employers liability insurance Product liability insurance Legal environmental insurance Director & Officer insurance Business Risk Management Risk Financing Price erosion Business process reengineering Market developments Innovation around “ waste no more” Price volatility raw materials Risk committee Hedging Shortage waste volume Terms & conditions Import of waste P&I insurance Define risk tolerance Our Profit & Loss Statement Revenue Raw material, supplies & energy Risk Rating 21

Insurance solutions & Risk rating Operational Risks Risk Management programmes to mitigate the risk Risk Financing programmes Fire hazards Fire protection system SHEQ Real estate Site surveys by insurers All risk insurance (Property / machinery breakdown / business interruption) Construction All Risk insurance Road incidents Driver training / Driver coaching / Toolbox meetings Motor fleet insurance Land based equipment insurance Reputation risk Crisis management exercising and planning Emergency response teams Credit risk Prompt follow up by credit receivable department Terms & conditions Vendor screening Credit insurance Liability risk ( occupational incidents, product -, service delivery default, etc) SHEQ procedures Employee training Terms and conditions Quality systems Maintenance systems Workers compensation insurance General liability insurance Employers liability insurance Product liability insurance Legal environmental insurance Director & Officer insurance 22 Risk Rating

What if – CCD scenario ? 23

The balance sheet impact versus financial protection 24

The impact on our profit & loss statement 25

Wrap-up § Application – Pragmatic RM framework – (Re) start risk management – Tool for analysis and presentation – Assess Risk Management maturity – Apply the stress test – Linking risks to financials – Quickly identify areas for improvement – The basis for comprehensive risk management § Apply the stress test, it will make a big difference! 26

Question What is a Stress Test? It is a test to determine how much pressure or tension a company can withstand. Do you know how much pressure your organisation can withstand? Can anyone tell me? 27

Question “Most of us spend too much time on what is urgent and not enough time on what is important. ” - Stephen R. Covey - “What the wise do in the beginning, fools do in the end. ” - Warren Buffett - Is risk management a proactive, value adding process in your organisation? 28

Question “Read books are far less valuable than unread ones" - Nassim Nicholas Taleb - Who has had a brainstorm session during the last 6 months about what you never expected to happen? 29

Other questions? 30