Internal risks

Internal Strategic

Identification of major transforming technologies

Our success depends on the sustainable growth of our business through research, development and innovation. If we are not able to identify and adopt major transforming technologies in a timely manner, this may lead to the loss of our leadership positions and adversely affect our business.

Risk corrective actions

The risk of missing relevant technology developments is mitigated in four ways. Firstly, we adequately support research and development with a spend of 2.6 percent of revenue (€373 million). Secondly, as defined in our core innovation process, our key projects have detailed technology roadmaps which assess relevant technology horizons and pathways to acquire and deploy new technologies. Thirdly, we have an established and managed global open innovation capability to identify, assess (as opportunities or threats) and acquire the most recent and promising emerging sciences and technologies. These technology platforms are used as an integral part of our ideation process, where we define technology and market opportunities. Finally, we have a Chief Scientist to advise and guide the Head of Supply Chain, Research and Development and the RD&I Leadership Team on diverse aspects of external research and to benchmark our own R&D capabilities.

Internal Operational – Top five risk

Attraction and retention of talent

Successfully executing our strategy is, to a large extent, dependent on having the right people.

Risk corrective actions

Diverse and inclusive talent development was identified as a Strategic focus area in the 2013 Strategy review. Consequently, we have developed a new global process for integrated talent management. This focuses on the further professionalization of recruitment, a more rigorous approach to the identification and development of leadership potential and a more transparent approach to career development opportunities. In addition, as part of the overall performance improvement program, we have further developed the AkzoNobel Academy. This is focused on building functional capability across the company and developing a higher level of project and change management skills, as well as providing a platform for the sharing of best practices. We have also continued with the harmonization of key HR administration processes to provide efficient service and free up time for the business partnering that is crucial to helping us attract, develop and retain talented people.

Internal Operational

Production process risks

Risks in production processes can adversely affect our results. These risks arise from areas such as personal health and safety, process safety and product safety. Unlikely scenarios can involve major incidents with a high impact for our organization, causing business continuity risks and reputational damage.

Risk corrective actions

We continuously strive to improve our safety performance. Each year, we organize a company-wide Safety Day focusing on enforcing our TakeCare program. TakeCare is the umbrella for all existing and future safety initiatives at business and central level. Among other initiatives, this encompasses our Life-Saving Rules program, which includes a “golden principle” and eight basic safety rules that have been mandatory for all AkzoNobel employees and all our contractors since April 2013. We continue with our business continuity planning and have appropriate risk transfer arrangements in place. To help realize our 2015 safety target for total reportable injuries (TRR) of <2.0 incidents per million hours worked, we have increased management attention on people safety, as well as implementing enhanced process safety (such as asset integrity) and occupational health standards, and improving the HSE audit process. See Note 7-10 of the Sustainability statements for more information about our safety improvements.

Internal Operational – Top five risk

Management of change

In order to implement our strategic agenda we are changing our operating model, which includes the setting up of a Global business services function. We are also undertaking various restructuring projects which require significant change, as well as stakeholder management and project management expertise. Failure to successfully execute these initiatives could lead to industrial action and, ultimately, to not achieving our strategic ambitions.

Risk corrective actions

In 2013, we introduced new Core Principles and Values which will set in motion the behavioral changes that will help to accelerate the implementation of our strategy. Senior management is involved in all critical projects that have been prioritized and are supervised by the Executive Committee to ensure an aligned and integrated vision and thrust from the top for the company’s change agenda. Project management and change management are both included in the curriculum of the AkzoNobel Academy.