Novozymes Healthcare Denmark 2010 Novozymes Report THE NOVOZYMES REPORT 2010 © Novozymes A/S 2011-01471-01 · Print run: 2,000 39 MANAGEMENT Risk management 40 MANAGEMENT Risk management RISK MANAGEMENT For a decade now, Novozymes has had a vision of creating value in the broadest sense. We aim to create a cleaner environment, better lives, and better business. The way Novozymes is managed reflects this, as management systems are set up to seek opportunities in all these areas while at the same time reducing risk and ensuring compliance with rules and regulations. The process of identifying and managing risk is integrated into the management systems at Novozymes. We define risks as “events or tendencies that can prevent the company from achieving its overall targets – including financial, environmental, and social targets – or negatively affect our image or our future results and activities.” Novozymes strives to identify risks as early as possible and, once they have been identified, act and follow up on them. At the top of the management system, Touch the World sets out the company’s vision, company idea, commitment, and values. It guides us in everything we do and outlines Novozymes’ philosophy. By acting in accordance with these principles, we encourage the right behavior and thereby reduce the risk of misconduct. To ensure that the company lives up to the values in Touch the World, an organizational performance process is conducted annually where the impact of each business unit’s work to support and uphold the principles in Touch the World is assessed. This process is overseen by Executive Management and the results reported to Board of Directors. Risks are often related to external factors affecting our achievement of targets, but can also be related to internal procedures, such as errors leading to the misstatement of information, malfunctioning of products, etc. Novozymes strives to minimize these procedural risks through the extensive use of quality management systems and ISO certifications, which include general policies and standards, as well as detailed control and action requirements covering both global procedures and specific requirements dependent on location, business area, and function. To ensure compliance with quality management systems, a large number of internal quality audits are performed. Each year, a report on compliance with these systems is submitted to Executive Management. REACH SUPPORTS NOVOZYMES’ BUSINESS STRATEGY REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) is a European Union (EU) regulation which entered into force in June 2007, replacing some 40 existing EU regulations and directives on chemicals. More than 30 different enzymes need to be registered by 2018 as they are regarded as chemicals under REACH. Novozymes’ enzymes for industries such as detergent, leather, textile, and biofuel require registration. Timely and accurate reporting Novozymes attaches great importance to timely and accurate reporting, as this is considered key to being a trustworthy company. Novozymes’ risk management and internal controls relating to financial reporting are designed to facilitate: Presentation of management accounts that allow the Group’s performance to be measured, evaluated, and monitored Presentation of financial statements that provide a true and fair view without material misstatement, and comply with International Financial Reporting Standards as adopted by the EU, and other additional disclosure requirements for the annual reports of listed companies Novozymes’ internal controls and risk management systems are updated on an ongoing basis and have been designed with a view to discovering and eliminating errors and defects in the financial statements. However, as there is always a risk of misuse of assets, unexpected losses, etc., the internal controls and risk management systems can only provide reasonable and not absolute assurance that all material errors and defects are discovered and eliminated. The internal controls and risk management systems also cover environmental and social data in The Novozymes Report. A more detailed description of Novozymes’ risk management and internal controls concerning the financial reporting process can be found in the statutory report on corporate governance fulfilling the requirements in Section 107b of the Danish Financial Statements Act. The financial reporting process is monitored by the Audit Committee. As part of this monitoring, all cases of fraud and concerns raised either through the whistleblower system or directly by internal or external personnel are reported to the Audit Committee. Six cases were reported in 2010. Four cases led to the dismissal of employees, of which two were reported to the police. First mover on registration Novozymes was the first of the European enzyme manufacturers to register enzymes produced in volumes of more than 1,000 tons per year, which is the first major registration milestone under REACH. The enzyme groups in question are proteases (mainly used in the detergent industry) and glucoamylases (mainly used in the production of starch and fuel). With the ambition of being the first to submit REACH dossiers, Novozymes took on sole responsibility for assessing the necessary risk and safety data for the enzyme industry as lead registrant. Novozymes has successfully submitted the required data in two comprehensive dossiers representing hundreds of products. These include exposure scenarios documenting adequate control of risks. Regulatory requirements as opportunities Novozymes looks positively on REACH, as the increased focus on sustainable solutions outweighs the increased burden of compliance. One important objective of the regulation is to encourage the substitution of hazardous substances with safer substances or technologies as economically and technically viable alternatives become available. REACH has the potential to drive innovation and sustainable growth through the replacement of harsh chemicals with safer biological solutions. REACH therefore supports Novozymes’ ambition and business strategy by stimulating customer demand for sustainable solutions, where enzymatic and other biological solutions are key alternatives. Novozymes is implementing all the requirements of REACH as they come into force in order to ensure uninterrupted supplies to customers. Given the high quality of the safety data and competencies we have developed together with our customers, we are in a good position to deal with the requirements. Novozymes also sees REACH as a great opportunity to implement high global safety standards for enzyme products. COMPLIANCE PROCESS Fulfilling sustainability reporting requirements Under Section 99a of the Danish Financial Statements Act, it is mandatory for large companies to report on corporate responsibility. As a member of the UN Global Compact, Novozymes prepares a Communication on Progress that is published in Supplementary Reporting. This Communication on Progress fulfills the requirement for the reporting on corporate responsibility. In addition to this, integrated financial, environmental, and social reporting is included in The Novozymes Report. A Y S Risks, opportunities, and stakeholder engagement While Novozymes aims to do business in accordance with our values, we also have to stay in touch with the needs of society. One way of identifying risks, opportunities, and new trends, while at the same time living up to Novozymes' pp 39-40 Novozymes discuss their risk management processes in a holistic manner, linking the achievement of their overall vision of aiming ‘to create a cleaner environment, better lives, and better business’ to the successful management of risks. There is a clear indication that the risk section includes any ‘events or tendencies that can prevent the Company from achieving its overall targets – including financial, environmental, and social targets’. www.blacksunplc.com © Black Sun Plc 2011 45
