1. Introduction

Risk is the possibility of an event occurring that will have a negative impact on the people, assets, environment, reputation, or strategic objectives of the Group, including forgoing potential opportunities. Calculated risk-taking within a pre-established risk appetite endorsed by the Board is an inherent aspect of the activities of Solvay. This risk appetite is translated through a number of Group policies approved by the Comex, and especially through the 25 “red lines” set out in the Solvay Management Book as mandatory rules.

The Group’s systematic risk management is integrated with strategy, business decisions and operations through the Enterprise Risk Management (ERM) approach, facilitated by the Internal Audit and Risk Management (IA/RM) department. This approach ensures that Solvay leaders identify, assess, and manage all potentially significant business risks and opportunities. Risk management is integrated into strategic and operational decision-making; it is seen as an essential management tool and an important aid in making the decisions needed to achieve the Company’s short, medium, and long-term objectives. In a context of global economic and political uncertainty, changing power balances, different growth dynamics, shortening market cycles, raw-material and energy price volatility, and quick technological evolution, Solvay also believes that monitoring and managing risks effectively is key to achieving its sustainability objectives.

The ERM methodology was refined in 2014, and then rolled out across the whole Group in 2015. The revisions introduced improvements that allow a better prioritization of relevant risks and a more focused risk response by individual GBUs and functions, and at Group level.

GBU Risk Coordinators were appointed in 2016, and their role has been clarified. They are part of a network facilitated by IA/RM to share best practices and methodology improvements. Also in 2016, GBUs updated their risk maps to take into account the status of the risk treatment actions launched previously.

The key steps of the ERM process are:

  • an initial series of risk management exercises in which each GBU and each function, assisted by the IA/RM team, reviews and updates its own risk matrix, and also defines risk owners responsible for mitigating the most critical risks.
  • a second phase in which a risk identification is conducted with the Leadership Council: building on an IA/RM team analysis of individual GBU/function transversal or correlated risks, a list of Group risks is generated and then assessed. This year, the correlation analysis has been extended to ensure a better risk response;
  • in a further phase, Group risks (considered as the most critical risks for the Group) are closely reviewed by the Group Risk Committee (composed of the Executive Committee and the general managers of the Industrial, Legal & Compliance, Human Resources, and Sustainable Development functions). For each Group risk, a member of the Comex is appointed to be the risk sponsor and to ensure that the risk is adequately addressed.
  • Finally, the Group risks update is presented at an extended Audit Committee session dedicated to this subject, where the Chairman of the Board, the CEO, and other Board members are present. The CEO presents and explains the key changes.

The mitigating actions and their status are monitored and reported by the IA/RM team in a Group risk dashboard. This dashboard is updated, published and formally reviewed by the Group Risk Committee twice during the year. The committee assesses both progress on mitigating actions and new developments in the risk environment. Group risks are also considered annually by the Audit Committee of the Board of Directors.

Internal control is one aspect of risk management. Please refer to section 8 of the Corporate Governance section of this Annual Report for a detailed description of the Solvay Group risk management and internal control system.

Crisis Preparedness, another important aspect of the response to risk, operates a structured network within the Group. Assigned members perform tasks and implement programs to ensure the readiness of their business units and functions. These programs include crisis simulations, media training for potential spokespersons, maintenance of key databases, and analysis of relevant internal and external events. The risks identified through the ERM approach influence the scenarios used in the simulations.

The description of the risks relevant to Solvay and the actions the Group takes to reduce those risks are listed below. The mitigation efforts described do not guarantee that risks will not materialize or impact the Group, but they show how Solvay is proactively managing risk exposures.