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Investor Relations

Principle Risks and Uncertainties

Olam has a rigorous risk management framework, designed to identify and assess the likelihood and impact of risks and to manage the actions necessary to mitigate their impact. The process identifies risks from a top-down strategic perspective and a bottom-up business perspective; overall responsibility to monitor and assess risk lies with the Risk Office.

The Enterprise Risk Management framework defines 51 individual risks across 11 categories. Each risk is continually evaluated for each business on both an inherent and residual basis. Inherent risks are the threat an activity poses if there are no mitigating factors or controls in place; residual risks are those that remain after mitigations to the inherent risks are taken into account. Each risk is assessed for likelihood of occurrence and impact and overseen by one of the Board Committees. The Enterprise Risk Scorecard is reviewed and updated for presentation to the Board Risk Committee on a quarterly basis. The following table lists the individual risk factors in each of the categories, and describes the key controls and mitigations for each.

Risk Category Key Controls and mitigation Board Committee overseeing specific risk
Trading risks
  • Price Risk
  • Basis Risk
  • Structure Risk
  • Arbitrage Risk
  • Derivative Risk
  • Liquidity Risk
Trading risks are controlled by regular monitoring of positions
using industry-standard metrics. The annual risk budgeting
process defines position and risk metric limits to control
exposures.Olam hedges price risk on the world’s commodities exchanges,
both through derivatives and tendering.
Read more about the Board Risk Committee’s responsibilities and members on page 16 of the
Governance Report.
Operational risks
  • Credit Risk1
  • Counterparty Risk1
  • Stock Risk2
  • Quality Risk2
  • Systems and Controls Failure
  • Risk2
  • Fraud Risk2
  • Project Execution Risk3
  • Asset Utilisation Risk3
Field operating control and primary sourcing infrastructure is in
place in every country where Olam operates.Olam’s credit/counterparty rating system defines credit limits and
controls, promoting fragmentation of credit exposure on short
tenors.Insurance is taken to provide inventory cover as well as credit
defaults.
1. Read more about the Board Risk Committee’s responsibilities and members on page 16 of the
Governance Report.
2. Read more about the Audit Committee’s responsibilities and members on page 17 of the
Governance Report.
3. Read more about the Capital and Investment Committee’s responsibilities and members on
page 20 of the Governance Report.
Currency risks
  • Transactional Currency Risk4
  • Translational Currency Risk5
Olam operates in many geographies and is therefore exposed to many different currencies. G7 currency hedging is performed by a centralised Treasury function and local currency limits in the origins and destinations are assigned to accommodate operational requirements. 4. Read more about the Board Risk Committee’s responsibilities and members on page 16 of the
Governance Report.
5. Read more about the Capital and Investment Committee’s responsibilities and members on
page 20 of the Governance Report.
Agricultural risks
  • Weather Risk
  • Pests and Diseases Risk
  • Agronomy/GAP (Good Agricultural Practices) Risk
Olam employs advanced crop-monitoring technology and
agronomy experts, irrigation facilities, flood control measures and crop insurance.
Read more about the Corporate Responsibilities and Sustainability Committee’s responsibilities and members on page 21 of the Governance
Report.
Political and sovereign risks
  • Asset Nationalisation Risk
  • Selective Discrimination Risk
  • Forced Abandonment Risk
  • Duty/Tariff and Export/Import
  • Ban Risk
  • Terrorism/Kidnapping Risk
Olam has deep-seated presence in many of the countries in which it operates, built over many years, and has consequently gained substantial knowledge of local practices. Olam maintains global political risk and terrorism risk insurance. Read more about the Board Risk Committee’s responsibilities and members on page 16 of the Governance Report.
Reputational risks
  • Food Safety/Hygiene and Product Recall Risk
  • Health and Safety Risk
  • Social Risk – Labour
  • Social Risk – Livelihoods
  • Environmental Risk – Land
  • Environmental Risk – Water
  • Environmental Risk – Climate Change
  • Environmental Risk – Food Security
Reputational impact is often just one of several negative impacts
that can arise from poor practices. Olam has put in place a suite of policies, codes and standards to guide actions and behaviours. These include the Olam Code of Conduct; the Olam Crisis Escalation Procedure; the Olam Plantations, Concessions and Farms Code; the Olam Livelihood Charter; and the Olam Supplier Code.
Read more about the Corporate Responsibility
and Sustainability Committee’s responsibilities
and members on page 21 of the Governance Report.
Regulatory and compliance risks
  • Market Compliance Risk6
  • Bribery/Corruption Risk7
  • Transfer Pricing Risk7
  • Taxation Risk7
  • Other Regulatory Risk7
Olam’s Market Compliance Office is a global function whose primary role is to ensure that we are fully compliant within all external regulation. 6. Read more about the Board Risk Committee’s responsibilities and members on page 16 of the Governance Report.
7..Read more about the Audit Committee’s responsibilities and members on page 17 of the Governance Report.
Capital structure and financing risks
  • Interest Rate Risk
  • Funding Liquidity/Margin Call Risk
  • Credit Metrics Risk
  • Activist Investor Risk
  • Short Seller Attack Risk
Olam has a strong base of long-term shareholders. The company maintains strong banking relationships providing committed banking lines, thereby assuring good liquidity. Read more about the Capital and Investment Committee’s responsibilities and members on page 20 of the Governance Report.
Natural perils
  • Pandemic Risk
  • Fire Risk
  • Flood Risk
  • Earthquake Risk
  • Hurricane/Typhoon/Storm Risk
Olam maintains insurance cover against risk of natural disasters, such as flood, fire, earthquake and storms. Read more about the Board Risk Committee’s responsibilities and members on page 16 of the Governance Report.
Other
  • Key Person Risk (succession planning)8
  • Cybersecurity Risk9
  • IT Risk9
Succession plans are in place to provide a second line of
leadership from with the company’s Operating Committee and Management Committee. Olam employs IT security experts, as well as having in place IT cybersecurity infrastructure.
8. Read more about the Human Resource and
Compensation Committee’s responsibilities and
members on page 14 of the Governance Report.
Read more about the Audit Committee’s responsibilities and members on page 17 of the Governance Report.
Strategic risks
  • Strategic Risk
All strategic risks are overseen by the offices of the CEO and COO, and by the Executive Committee. Read more about the Board’s responsibilities and
members on page 2 of the Governance Report.