Principal risks and uncertainties

Our 2018 annual report extensively describes our risk management framework and the major risk factors which may prevent full achievement of our objectives within the next three to five years, as well as beyond the five-year time horizon. We consider the medium-term and long-term risks as communicated in our Report 2018, including the four medium-term risks assessed to increase, to be still valid. Please refer to our 2018 Report website.

Risks assessed to increase in our 2018 annual report

Global economy and the geo-political context

Risk description

The world’s geo-political situation remains unpredictable and, as a company, we operate in highly competitive markets. Failure to carefully manage and develop a good understanding of end-user segments could have an immediate impact on financial performance, resulting in the company not realizing its financial guidance.

Mitigating actions

  • Continue our strategy to reduce both our operational cost base and complexity
  • Leverage our Global Business Services to further standardize core functional processes in all regions
  • Further deploy our commercial excellence programs and more sustainable product solutions to capture organic growth
  • Centralize management of foreign currency exposure and reduction of transactional exposure through natural hedges in our main currencies
  • Include political risk assessment in investment decisions and medium-term operational planning

Information technology and cybersecurity

Risk description

The company’s longer-term IT strategy means we increasingly rely on fewer consolidated critical applications. With the number of digital exchanges of business transactions increasing, the non-availability of IT systems – or unauthorized access – could have a direct impact on our business processes, competitive position and reputation.

Mitigating actions

  • Focus on measures such as redundant design, back-up processes, virus protection, anti-spoofing, advanced forensic scanning and mission critical infrastructure support
  • Improve incident response and reporting by implementing a cyber Security Operations Center (SOC), providing improved coordination, monitoring and response to cybersecurity
  • Centrally monitor access control processes and identity and access enhancements
  • Roll-out of the new Information Management security standard for industrial control systems to all manufacturing locations
  • Further test and improve IT security response and incident management process
  • Further rationalize our application landscape to reduce complexity and enhance efficiency and effectiveness

Attraction and retention of talent

Risk description

Ensuring continued alignment between a rapidly evolving business environment and qualifications, capabilities and talent of our workforce across the globe is an increasingly complex process. At the same time, it determines to a large extent the success of our organization.

Mitigating actions

  • Strengthen AkzoNobel’s employee value proposition
  • Focus on talent development programs and succession planning (for example, Talent and Opportunity Review, Your AkzoNobel, nomination of Talent Managers)
  • Fully embed values and behaviors in our Performance and Development Dialog annual appraisal

Management of change

Risk description

Our Winning together: 15 by 20 strategy will help transform AkzoNobel into a long-term leader. But we also recognize the risks associated with such profound changes. This means we need to invest in building an organization structure which encourages and embraces change, while balancing opportunity and risk.

Mitigating actions

  • Focus on core principles and values and embed these in reward systems to set desired behavioral changes in motion
  • Identify organizational health initiatives and track progress periodically
  • Roll-out principles of commercial excellence in all levels of the organization
  • Support adoption of a new organization model through the creation of a Planning and Transformation Office, including a network of Regional Transformation Leads
  • Implement standard solutions across the company under the responsibility of designated Global Process Owners
  • Continue the journey of creating fit-for-purpose support functions to drive synergies and standardization at a company-wide level
  • Roll-out R&D effectiveness program, including Innovation Team and startup challenge

Board of Management’s statement on the condensed consolidated half-year 2019 financial statements and the interim management report.

We have prepared the half-year financial report 2019 of AkzoNobel, and the undertakings included in the consolidation taken as a whole, in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Dutch disclosure requirements for half-yearly financial reports.

To the best of our knowledge:

  1. The condensed consolidated financial statements in this half-year financial report 2019 give a true and fair view of our assets and liabilities, financial position at June 30, 2019, and of the result of our consolidated operations for the first-half year of 2019.
  2. The interim management report in this half-year financial report 2019 includes a fair view of the information required pursuant to section 5:25d, subsections 8 and 9 of the Dutch Act on Financial Supervision.

Amsterdam, July 24, 2019
The Board of Management

Thierry Vanlancker
Maarten de Vries