Integrated Risk Management Aon Global Risk Consulting (Alex van den Doel) Van Gansewinkel (Doede de Waij )

2 Risk Management and financial impact Chemie-Pack (Moerdijk)  45 employees  EUR 6,5m Revenu Fire on January 5, 2011  Damage: EUR 71 million  Bankruptcy on August 25, 2011

3 Events can have huge impact! Source: Aon / Oxford Metrica: Reputation Review 2012  More than 50% value impact possible! CompanyEventValueReaction TEPCOJapan EQ-89.6%- $ 37bln DexiaGreek debt-87.3%- $ 3.9 bln Research in MotionService Disruption-49.7%- $ 6 bln BPExplosion / Oil spill-29%- $ 53 bln AppleIphone Antenna-2.4%- $ 6 bln

4 Objectives Integrated Risk Management (IRM) Protect:  Shareholder’s value  Financial objectives Set priorities Take more not less business risk!

5 Agenda  Integrated Risk Management – Film  Integrated Risk Management – Execution 1.Risk Rating and Maturity 2.Stress Test 3.Risk Bearing Capacity  Integrated Risk Management – In Practice –Case Study Van Gansewinkel – Doede de Waij  Wrap-up and Questions

6 Integrated Risk Management – Film

7 IRM Approach – Execution 1A Risk Rating & Maturity Identify main risk areas from a financial perspective (QUICK SCAN) 1B Risk Assessment Identify and assess most significant risks: strategic, operational, financial, compliance 2B Scenario analysis Analysis in detail of most severe scenario's impacting financial objectives 2A Stress test Identify and quantify industry specific stress scenario's 3A Risk Bearing Capacity Calculate and substantiate how much a company can retain 3B Risk Appetite Consultative Approach to determine how much a company wants to retain 4 Register Record and monitor risk developments online 6 Compliance Independently review risk management and financing measures 7 Risk Financing Optimize the Risk Financing structure and programmes Annual update 5 Outsourcing Risk management activities delivered by external resources

8 IRM Approach – Execution 1A Risk Rating & Maturity Identify main risk areas from a financial perspective (QUICK SCAN) 1B Risk Assessment Identify and assess most significant risks: strategic, operational, financial, compliance 2B Scenario analysis Analysis in detail of most severe scenario's impacting financial objectives 2A Stress test Identify and quantify industry specific stress scenario's 3A Risk Bearing Capacity Calculate and substantiate how much a company can retain 3B Risk Appetite Consultative Approach to determine how much a company wants to retain 4 Register Record and monitor risk developments online 6 Compliance Independently review risk management and financing measures 7 Risk Financing Optimize the Risk Financing structure and programmes Annual update 5 Outsourcing Risk management activities delivered by external resources

9 1A) Risk Rating  Qualitative assessment of adequacy of: –Risk identification process –Risk management measures –Risk financing measures  Scope: –Balance Sheet and P&L –Enterprise-wide  Results –Risk Rating dashboard –Starting point for further analysis –Basis for monitoring progress effectiveness

10 1A) Risk Rating

11 1A) Risk Rating

12 1A) Risk Rating

13 1A) Risk Maturity Above average Below average Risk Maturity Rating Comments for Improving Rating Insight Into Risk Maturity Ratings Globally

14 1A) Higher Risk Maturity adds value!

15 2A) Stress Testing  Identify scenarios that can impact the financial objectives  Scenarios: –Industry specific (Aon Database) –Company specific (desk study) –Out-of-the-box scenarios (workshop)

16 Module 2B – Scenario analysis 16  In-debt analysis of most critical scenarios  Approach –Determine most critical activities for strategy, value chain, sales, costs or liability risks –Workshops with internal and external experts –Event trees to determine financial consequences in detail  Very detailed insight in the impact of a critical scenario on the financial objectives  Insight and focus for improvement in risk management

17 Module 3A – Risk Bearing Capacity  Quantify of the absolute maximum amount of risk the company is able to retain (Risk Bearing Capacity)  Approach –Analyse the company's financial strategy and policies (i.e. future CAPEX, dividend increase) > discussion Treasury / CFO –Select the most "constraining financial ratio's (from bank covenants, credit rating) –Develop a model for calculating risk bearing capacity –Calculate risk bearing capacity  Result –Definition and understanding of the company's risk bearing capacity and risk appetite

18 Integrated Risk Management - In practice Van Gansewinkel Groep Doede de Waij - Risk- & Insurance manager Phone:

19 Waste services, raw materials and energy supplier Active across the entire waste chain Annual revenues €1.1 billion Nine countries Market leader in the Benelux Top 5 player in Europe Approximately 5,800 employees 150,000 customers 1 million households About Van Gansewinkel Groep

20 Our customer driven supply chain Collection (c. 7 Mt) Collection of household -, commercial -, & hazardous waste 2,000 vehicles Recycling (c. 5 Mt) Coolrec (plastics / metals) Maltha (glass) VG Minerals (building mat.) VG Paper (office paper) Energy from Waste 2 EfW plants – Rozenbrug & Duiven Steam Electricity City heating c. 2 Mt fuels ~70%

21 Risk management process Operational RisksRisk ManagementRisk FinancingRisk Rating Fire / Natural hazardsFire protection system SHEQ Real estate Site surveys by insurers All risk policy (Property / machinery breakdown / business interruption) Road incidentsDriver training / Driver coaching / Toolbox meetingsMotor fleet insurance Land based equipment insurance Reputation riskCrisis management exercising and planning Emergency response teams Credit riskPrompt follow up by credit receivable department Terms & conditions Vendor screening Credit insurance for the paper division Financial fraudAO/IC proceduresFraud insurance Liability risk ( occupational incidents, product -, service delivery, etc) SHEQ procedures Employee training Terms and conditions Quality systems Maintenance systems Workers compensation insurance General liability insurance Employers liability insurance Product liability insurance Legal environmental insurance Director & Officer insurance Business RisksRisk ManagementRisk FinancingRisk Rating Price erosionBusiness process reengineering Market developmentsInnovation around “ waste no more” Price volatility raw materialsRisk committeeHedging Shortage waste volumeTerms & conditions Import of wasteP&I insurance Assessment of the risks which: Can decrease the total assets Can reduce the equity and/or increase the liabilities Can decrease our revenues and/or increase costs Can impact our cash flow Risk assessmentsStress Test Review Maximum Possible loss (MPL scenario) Liability Risk Quantification Business Impact Analysis Reputation assessment What will be the impact of the various stress tests looking at: Our balance sheet Property, plant, equipment, inventories Intangible assets Contingent Liabilities Etc. Our Profit & Loss Statement Revenue Raw material, supplies & energy Financial analyses Define worst case scenario’s Define risk tolerance

22 Insurance solutions & Risk rating Operational RisksRisk Management programmes to mitigate the riskRisk Financing programmes Risk Rating Fire hazards Fire protection system SHEQ Real estate Site surveys by insurers All risk insurance (Property / machinery breakdown / business interruption) Construction All Risk insurance Road incidentsDriver training / Driver coaching / Toolbox meetings Motor fleet insurance Land based equipment insurance Reputation risk Crisis management exercising and planning Emergency response teams Credit risk Prompt follow up by credit receivable department Terms & conditions Vendor screening Credit insurance Liability risk ( occupational incidents, product -, service delivery default, etc) SHEQ procedures Employee training Terms and conditions Quality systems Maintenance systems Workers compensation insurance General liability insurance Employers liability insurance Product liability insurance Legal environmental insurance Director & Officer insurance

23 What if – CCD scenario ?

24 The balance sheet impact versus financial protection

25 The impact on our profit & loss statement

26 Wrap-up  Application –Pragmatic RM framework –(Re) start risk management –Tool for analysis and presentation –Assess Risk Management maturity –Apply the stress test –Linking risks to financials –Quickly identify areas for improvement –The basis for comprehensive risk management  Apply the stress test, it will make a big difference!

27 Question What is a Stress Test? It is a test to determine how much pressure or tension a company can withstand. Do you know how much pressure your organisation can withstand? Can anyone tell me?

28 Question “Most of us spend too much time on what is urgent and not enough time on what is important.” - Stephen R. Covey - “What the wise do in the beginning, fools do in the end.” - Warren Buffett - Is risk management a proactive, value adding process in your organisation?

29 Question “Read books are far less valuable than unread ones" - Nassim Nicholas Taleb - Who has had a brainstorm session during the last 6 months about what you never expected to happen?

30 Other questions?