Portfolio Risk Management- Proposed Solutions And Improvement Initiatives Jan Ambergen, Treasury Director 23rd May 2016

Content: “Risk Walk Through” Company overview Business Risk Inventory External risks Operational risks Financial Risks … what remains… IFF Presentation │ May 23rd 2016

IFF Presentation │ May 23rd 2016

IFF Presentation │ May 23rd 2016

IFF Presentation │ May 23rd 2016

Global Risk Player “Know the rules of the game” IFF Presentation │ May 23rd 2016

Credit & Collection characteristics Financial: Collecting the global turnover USD 3.0 bln in all COD’s Manufacturing / invoicing facilities roughly 35 in 30+ countries Accounts Receivable USD 550-600 mio “Day Sales Outstanding” , around 70 days People: Senior Credit Managers in all regions Junior collectors in Budapest / Hangzhou / Chennai CC reporting into Treasury (Corp Treasurer – CFO) Systems: One instance SAP globally Dispute and collection models SAP implemented Use of SAP data cubes Procedures: Centralized approval of new customers and term extension Junior collectors with customer touch, escalation to SCM/Sales Partnership with sales “30 days overdue rule” => ownership sales IFF Presentation │ May 23rd 2016 7

Content: “Risk Walk Through” Company overview Business Risk Inventory External risks Operational risks Financial Risks … what remains… IFF Presentation │ May 23rd 2016

Business Risk Inventory IFF Presentation │ May 23rd 2016

Risk Management IFF Presentation │ May 23rd 2016

Calculated Risk IFF Presentation │ May 23rd 2016

Content: “Risk Walk Through” Company overview Business Risk Inventory External risks Operational risks Financial Risks … what remains… IFF Presentation │ May 23rd 2016

Business Risk Inventory

Case 1: Nigeria Nigeria suffers from the low oil price. Summer 2015, Nigerian Central Bank issues rules for FX allocation, promoting domestic industry. Foreign currency is allocated based on industry priority and through an auction system. Opening a Letter of Credit takes 30 – 60 days. The container should go on the vessel in a few days time. LC is emailed from the opening bank, but original LC is somewhere in the corresponding banking network. Customer will run dry if the vessel is missed: Do you release for invoicing and shipment ? A: “yes, as long as I get an LC I’m OK” B: “no , as I don’t have the original LC, (internal rule) and I don’t want to have an overdue. I might lose the value of the container.” C: Check with sales the consequence of shipment delay and balance consequence for the customer against value of LC

External Risks Competitor: “…. outclassing you in ….” Competition drivers: Quality Technology Service model Price Payment term Political / Economic instability: “ .. gradual/sudden default ..” Trade Insurance, … limited reach … Avoid or simply accept ?......

Business Risk Inventory IFF Presentation │ May 23rd 2016

Internal / Operational Risks Management information: “....lack of … , … ineffective…..” Monthly reports on Net Working Capital components Weekly information provided to sales mgrs Expanding to dash board solutions Information technology: “.. non integrated… , .. inefficient…” One SAP / SAP data cubes Data integrity: Central Master data protocols Expand e-invoicing and workflow solutions Compliance: “… reputational risk …” Central Trade compliance group …. e.g. Iran IFF Presentation │ May 23rd 2016

Management information (example) AR performance by BU/region IFF Presentation │ May 23rd 2016 18

Business Risk Inventory IFF Presentation │ May 23rd 2016

Case 1: Global customer: “high risk” One of your global customers is in a serious financial situation. The global rating agencies have recently downgraded to BB. You are aware of severe cash flow issues and sales informs you restructuring is not smooth. Outstanding AR balance is several mio, overdue under control. Customer will move to the competition in case you would stop supply. What would you do from a risk perspective? A) Move terms to prepay, I don’t want to go to a write off situation. B) Continue to supply and cross your fingers C) Provide financial risk overview and commercial overview to senior mgt and let them take a decision. IFF Presentation │ May 23rd 2016

Financial Risks Credit: Scoring: qualitative / quantitative Default: Debt recovery services: cost / benefit ratio Emerging Markets: “50% of turnover is in EM” Foreign currency: Hedging Pricing currency Economic risk IFF Presentation │ May 23rd 2016

Management information (example) Country Risk IFF Presentation │ May 23rd 2016

Content: “Risk Walk Through” Company overview Business Risk Inventory External risks Operational risks Financial Risks … what remains… IFF Presentation │ May 23rd 2016

IFF Presentation │ Date

“I have chosen the proper INCO term, so I’m happy I’m insured……. …… but lost the customer as I could not deliver on time.” IFF Presentation │ Date

Remaining Q & A