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Risk Management

The implementation and reinforcement of the internal system for control and management of risk and opportunities, comprising tools and organizational structures developed with guidelines and standards defined at Group level, guarantees the achievement of the strategic objectives assigned by Top Management.

The Risk management System adopted in Maire Tecnimont and the continuous fine-tuning of risk management methodology based on experience and existing best practices, guarantees traceability and transparent analysis and control of risks and opportunities, through a process which allows the monitoring and control of risks of projects from the proposal phase and cross-departmental risks affecting the various corporate functions of Maire Tecnimont.

Risk Management Pillars

1. ERM and Project Risk Management Structure: the risks, including those related to social and environmental matters, are identified, monitored and managed both at corporate level (ERM), on a quarterly basis to provide a reasonable assurance that corporate objectives can be achieved, and at project level (Project Risk Management) from proposal preparation and along all the phases of the project life cycle in order to guarantee the execution schedule and economic results. 

2. Identification & Analysis: the Risk Management System undertakes the identification & assessment, as well the management of the risks and opportunities, in accordance to the “Precautionary Principle”

3. Control Strategy Implementation: for risks judged active, specific mitigation actions to offset the probability of occurrence and/or impact are undertaken.

4. Reporting Tools: the monitoring of the evolution of risks and opportunities, at project and portfolio level, are submitted to the management and group control bodies

5. Risk Management Database: the mitigation actions and experience accrued and acquired during each project is collected in a dedicated database to improve the risk control strategy for current and future projects.

Moreover, in order to consistently translate Maire Tecnimont’s values, and in accordance with the Sustainability Plan that promotes sustainable development fully in line with the guidelines of the United Nations Global Compact of which Maire Tecnimont has been an active member since 2011, Maire Tecnimont has decided to formalize specific group policies on Sustainability, which introduce principles and guidelines to link internal operating policies/procedures and management systems already in place. The formalization process was completed in 2019 and published in the first quarter of 2020.
  
With reference to the material topics, the group is exposed to a variety of risks. The table below lists the main risks and the main actions aimed at mitigating the effects and ensuring appropriate management.

 

Material Topics 

Reference scenario and main risks/opportunities

Mitigation actions (including the policies pursued or implemented)

- ETHICS AND COMPLIANCE
- ANTI-CORRUPTION
- GRIEVANCE MECHANISM

Carrying out its international activities, the Group must ensure compliance with its ethical principles, laws and relevant regulations by its employees and third party involved.
Main risks are related to non-compliance to the above as well the risks of fraud and/or illegal conduct and corruption in all its forms, including extortion and bribery. 
Further risks concern an incorrect detection of complaints raised by an individual or group of individuals related to actual or perceived impacts cause by the company’s operating activities.

- Implementation of the Group Code of Ethics and Organization, Management and Control Model as per Italian Legislative Decree 231/2001 (“231 Model”)
- Issuing and adoption of Group Standard Procedures
- Execution of audits by the Internal Audit Department and by the Supervisory Body as per Italian Legislative Decree 231/2001.
- Scheduling of induction sessions in order to improve the knowledge of the members of the Board of Directors and the Board of Statutory Auditors
- Training programs concerning Legislative Decree 231/2001, the 231 Model and the Group Code of Ethics or related issues for all Maire Tecnimont’s personnel
- Communications of the Grievance mechanism outlined in the Group Code of Ethics and Model 231 to all employees, suppliers, sub-contractors and business partners in general.

- EMPLOYMENT
- DIVERSITY
- INDUSTRIAL RELATIONS
- HUMAN CAPITAL DEVELOPMENT

The Group operates in over 45 countries, through approx. 50 companies and having to manage over 6,000 employees with different social and cultural backgrounds together with varied skills, daily facing the challenges deriving from diversity and multiculturalism. 
Main risks may relate to:
- loss of key personnel and/or highly specialized professionals;
- decrease of employee engagement and motivation;
- lack of training and development opportunities;
- decrease of attractiveness as employer in the labor market;
- non-compliance with relevant laws on worker’s rights;
- not respecting diversity and assuring equal opportunities.

- Implementation of the Group Code of Ethics and Organization, Management and Control Model as per Italian Legislative Decree 231/2001 (“231 Model”)
- Corporate guidelines for management of Human Capital;
- Processes related to employees’ skills and behaviors assessment;
- Development plans;
- Rewarding and incentive processes;
- Engagement surveys;
- Policies fostering work-life balance and encouraging ever growing responsibility;
- Care and respect of diversity value within the Group.
- Monitoring of worker’s rights respect and application of collective agreements;
- Industrial Relations system based on transparent and ongoing dialogue.

 - R&D & INNOVATION

Operating in competitive sectors, the Group is subject to risks associated with the constant development of used technologies and licenses in order to maintain and/or increase its market share.
Main risks could be related to:
- Technologies not “up to date” to the needs of the market
- Risks of know-how and Intellectual Property infringement Vs owned and third-party technologies
- Financial risks associated with the investment in R&D

- Technical and economic resources allocated to R & D;
- Proper management of the Group's intellectual property assets and technological skills in order to develop new business projects, technologies and licenses; 
- Collaboration with universities and research centers;
- Updating and protection of its patents and other intellectual property rights;
- Signature of specific Non-Disclosure Agreements with Vendors and third parties involved; 
- Constant monitoring of all projects and new initiatives in research and development through evaluation of expected results during the entire development and industrialization process
- Development of a new business unit ('Next Chem') dedicated to green acceleration through the launch of new technological initiatives in the field of energy transition, to better respond to new market dynamics.

- ECONOMIC DEVELOPMENT
- LOCAL COMMUNITIES/LOCAL ECONOMIC DEVELOPMENT
- CUSTOMER RELATIONS
- RESPONSIBLE SUPPLY CHAIN

The presence of the Group in over 45 countries and the execution of projects in some of these, involves a necessary and fundamental interaction with customers and local communities in order to guarantee their economic development. Possible risks may arise regarding the failure to support the local content in terms of opportunity for local labor force and for local-based suppliers of good and services, training for local people and investments in local assets.
Furthermore, a solid and reliable supply chain must be guaranteed, both in terms of performance and ethical behavior, including risks deriving from non-compliance by the supplier with the principles and policies to which the Group had requested to underwrite and pursue.
Finally, possible risks may concern non-compliance regarding information and labeling of products and services

- Implementation of the Group Code of Ethics and Organization, Management and Control Model as per Italian Legislative Decree 231/2001 (“231 Model”);
- Importance of MET Economic value distributed;
- Ability to provide a broad and integrated range of services, from feasibility studies to basic engineering, from selecting technology to developing lump-sum turnkey projects
- Policy (implemented) regarding the adoption of a strategy described below:
- Pursuing a local content strategy enhancing the opportunities for local labor force and goods and services, supplying training for local people
- Adoption of internal model to quantify the footprint in the local territory
-  Policy (implemented) regarding the management of suppliers, in accordance to the strategy described below:

- Promoting the Partner’s involvement even before the bidding stage, proposing innovative solutions which create added value
- Strengthening the local supply chain trough International Procurement Office (IPO) 
- Scouting of suppliers in different countries around the globe
- Using the E2Y procurement platform
- Maire Tecnimont group qualification and management process of supplier through questionnaires and tools requesting information about the Environment, Social Accountability, Health and Safety matters
- Sharing with suppliers of Maire Tecnimont Group’s Terms and Conditions that include environmental and social requirements
- Policy regarding information and labeling of products and services (there are no cases of "non-compliance" regarding information and labeling of products and services).

- HEALTH AND SAFETY OF EMPLOYEES AND CONTRACTORS
- HUMAN RIGHTS
- ENERGY EFFICIENCY
- GHG EMISSIONS
- WATER & WASTE MANAGEMENT

Maire Tecnimont is subject to laws and regulations for the protection of health and safety, the respect of human rights and the safeguarding of the environment at national, international and EU level. 
Being an EPC Contractors Group, the risks relative to the health and safety of the employees present every day at home office and construction site are continuously investigated and mitigated.
The HSE risk management is based on the principles of prevention, protection, awareness, promotion, and participation; its aim is to guarantee the workers’ health and safety and to protect the environment and the general well-being of the community. In spite of the Group adoption of such procedures and specifically at construction sites, the risk of events, even continuously investigated and mitigated, that is harmful to the health of people and the environment cannot be excluded.
Furthermore, possible risks may concern environmental non-compliance.
The Group is also exposed to risks related to climate change such as:
(i)    the impact of more restrictive laws and regulations on energy efficiency and climate change, which may lead to an increase in operational costs and, consequently, to a reduction in investment in the industry
(ii)    the impact of client awareness and sensitivity to climate change and GHG emissions reduction, with a consequent shift towards low carbon products.
The development of “general environmental regulations” could generate new business opportunities for Maire Tecnimont in the growing low carbon energy market. The expertise of the Group in developing sustainable solutions for its clients and the ability of the Group to react quickly to changes in environmental regulations are clear competitive advantages. 
Moreover, client and consumer demand for eco-friendly solutions and renewable energy technologies are on the up. Maire Tecnimont is already providing low-carbon solutions to its clients and is therefore equipped to handle the potential growth in demand.
The development of “general environmental regulations” could generate new business opportunities for Maire Tecnimont in the growing low carbon energy market. The expertise of the Group in developing sustainable solutions for its clients and the ability of the Group to react quickly to changes in environmental regulations are clear competitive advantages. 
Moreover, client and consumer demand for eco-friendly solutions and renewable energy technologies are on the up. Maire Tecnimont is already providing low-carbon solutions to its clients and is therefore equipped to handle the potential growth in demand.

- Implementation of the Group Code of Ethics and Organization, Management and Control Model as per Italian Legislative Decree 231/2001 (“231 Model”)
- Developing an HSE (Health, Safety and Environment) and SA (Social Accountability) Management System which is in line with the requirements of laws in force and with international standards ISO 14001 and OHSAS 18001, SA 8000 and for which multi-site certification has been obtained. 
- Performing of a detailed risk analysis to eliminate and minimize the probability and the impact related to an event.
- Performing the HSE Design, from Front End Engineering Design to detailed EPC phase.
- Implementing an intensive HSE training program for workers in each construction site and in head offices.
- Policy regarding environmental compliance (there are no cases of "non-compliance" with environmental laws and regulations).

- CUSTOMER RELATIONS / IT RISKS

Maire Tecnimont gives particular attention to the reliability of its IT systems as necessary to achieve business objectives.
Emphasis is placed on technology to protect confidential and proprietary information managed the IT systems. However, our hardware and software products and information contained in our corporate IT systems should be vulnerable to damage or disruption caused by circumstances beyond our control such as, malicious activities or fraud  by unauthorized third parties that intentionally misleads an employee into sending confidential information using  a written or verbal communication such as an email, fax, letter or phone call, cyber-attacks, , system or computer network failures, or computer viruses. The inability of IT systems to correctly perform for any reason could compromise operational activities and result in reduced performance, significant repair costs, transaction errors, data loss, processing inefficiencies, downtime, disputes with negative effects on brand reputation and commercial transactions.

In order to prevent these risks, the IT Systems and relevant processes have been structured in accordance to the requirement of Maire Tecnimont’s IT policies to prevent both cyberattacks and fraudulent attacks/social engineering frauds.  Integrated solutions have been developed according to the following main pillars:
 - Information’s storage on Cloud Infrastructure.
- Enterprise Access Service, so all users are authenticated by a sophisticated service which is able to grant the user using Multi Factor Authentication procedures or Security Certificates. Moreover, the Enterprise Access Service selects the access to its services. Devices or PC without antivirus, connecting from untrusty locations or users not compliant with enterprise policies are filtered and the access is denied.
- Artificial Intelligence Antifraud system
- Open Source Intelligence tools to search for sensitive corporate information on dark web and to protect domains and users in a more extensive way.
- Continuous and effective management of threats through a Security Operation Center operating 24/7 capable of avoiding virus, phishing, spam or spoofing activities, malicious domains.
- Periodic Cyber security assessment in line with ISO 27001 guidelines
- Internal simulated phishing campaigns, using different technologies (instant messaging, e-mail, paper documents) to identify at-risk user groups and reveal training needs.
- Extensive and focused IT and behavioral security training and awareness program towards employees.
- Timely communications to all Group employees as soon as threat intelligence team identifies new phishing campaigns, potential fraud attacks or new systems vulnerabilities.
-Integrated and centralized treasury payments, managed directly by Headquarter
- Advanced security policies to manage Bank details within the entire Value Chain

- HEALTH AND SAFETY OF EMPLOYEES AND CONTRACTORS / EPIDEMICS AND DISEASED

The Group, operating in over 45 countries, can be subject to a localized or extended event of epidemics or diseases that can have impacts to its business, to the productivity of its employees and to the supply chain.
The occurrence of any of the risks described hereunder could have a material adverse
effect on our business operations and financial performance.

Since 2018, Maire Tecnimont deployed the “be adaptive” program to enable its employees to work in Agile context. This transformation involves the Digital infrastructure, the organizational policies, the team’s culture and the competences of the employees. 
Therefore, Maire Tecnimont can rely on an organizational, technological and training platform which enables its employees to work in Agile mode “Smartworking”, able to support the normal productivity irrespective of the place of work of the employee.
- The regional distribution of workforce across several continents with strong integration and collaboration can mitigate possible constraints or travel ban. 
-Health Care Service to support employees and consultants located all over Italy, as well as the staff members of clients hosted at the Group’s Milan and Rome offices.
-Travel agent support has been strengthened for employees in order to manage any potential business trip’s limitation
-Periodical impact analysis on key projects in order to guarantee Business Continuity across supply chain involving whole organization in each country.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL RISK MANAGEMENT

The Group’s principal financial risks stemming from core operations are outlined below:

MARKET RISK The Group operates within an international environment and is subject to interest rate, exchange rate and price risk. A risk of fluctuating cash flows from core operations therefore follows, which may only partly be mitigated through appropriate policies.

PRICE AND CASH FLOW RISK Group results may be impacted by raw material, finished product and insurance cost price changes. This risk is mitigated through a precise and timely procurement policy and also through the use of derivative contracts. The Maire Tecnimont Group also seeks to minimize transaction currency risk through derivative contracts.  

CURRENCY RISK The currency used for the consolidated financial statements is the Euro. As stated, the Group operates in an international environment, with part of its receipts and payments made in currencies other than the Euro. A significant number of projects are quoted in or linked to the US Dollar or Russian Ruble; this factor, together with timing differences between the accrual of revenues and costs in currencies other than the presentation currency and their financial realization, exposes the Group to currency risk (transaction currency risk). The Maire Tecnimont Group seeks to minimize transaction currency risk through derivative contracts. Group level planning, coordination and management of such operations is carried out by the Finance Department, which monitors the correct correlation between derivative instruments and underlying cash flows and their appropriate representation as per international accounting standards. The Group furthermore has investments in subsidiaries in countries not belonging to the Eurozone and shareholders’ equity changes from local currency movements against the Euro are temporarily recognized to the “translation reserve” shareholders’ equity reserve.  

INTEREST RATE RISK Maire Tecnimont Group interest rate risk essentially concerns its variable medium/long-term loans. Variable rate debt interest rate risk not hedged through derivative instruments is however partly mitigated by liquidity remunerated at rates indexed to the same debt parameter (euribor). Any consequent interest rate fluctuations may create similar effects upon cash flows generated from inventories, although in an opposing manner than those produced on cash flows related to debt positions. The Group also uses Interest Rate Swap (IRS) derivatives to hedge its exposure to the risk of fluctuating interest rates on the no-recourse loan of MGR Verduno SpA, which is involved in the Alba-Bra Hospital concession reclassified under the item of assets and liabilities held for sale.

CREDIT RISK The Group credit risk represents the exposure to potential losses deriving from the non-compliance with obligations by counterparties. This stems from normal operations and is monitored by the operating and financial departments on the basis of set procedures, which establish the methods for quantifying and controlling client risk. They are managed according to procedures, including credit recovery and dispute management. Presently, there is no significant concentration of credit risk by region or by Client, as the Group operates on geographically diversified markets and through a range of clients and business lines. Receivables were recognized net of write-downs calculated according to counterparty non-compliance risk, based on client reliability (third parties, related parties and public sector clients). For IFRS 9 – Financial Instruments, the impairment requirements are based on an expected credit loss (ECL) model utilizing supporting information, available without unreasonable charges or effort, which includes historic, current and projected figures.

LIQUIDITY RISK This risk concerns the difficulty in sourcing new funding or access to liquid assets, resulting in the enterprise’s failure to satisfy payment commitments, being forced to incur additional funding costs or, in extreme instances, being faced with potential insolvency which may put its going concern at risk.   At the present moment, Maire Tecnimont considers that the good levels of liquidity held and prudent and functional management of the credit lines available are important elements for stability and sufficient to guarantee the resources necessary for operating continuity. The management of liquidity risk is based above all on the strategy of containing debt and maintaining financial equilibrium. Cash and cash equivalents at December 31, 2019 amount to Euro 727,394 thousand, an increase of Euro 77,385 thousand compared to December 31, 2018.

FINANCIAL COVENANT RISK This concerns the possibility that loan contracts include clauses permitting the lending Banks and other lenders to request immediate repayment on the occurrence of certain events, resulting therefore in a liquidity risk. Read More >

RISKS CONCERNING THE GROUP CAPACITY TO OBTAIN AND RETAIN GUARANTEED CREDIT LINES AND BANK GUARANTEES In the course of operations and, in particular, for participation in tenders, the signing of contracts with operators or receiving advances and payments from such during order execution, the Group is required to issue bank and/or insurance guarantees in favor of operators. The Group’s capacity to obtain such guarantees from banks and/or insurance companies depends on an assessment of the Group’s financial statements and, in particular, of the Group company involved, from analysis of the order risk, experience and the Group companies competitive positioning within its sector.   At the present moment, Maire Tecnimont is satisfied with the level of credit lines available, which are considered sufficient to guarantee the resources necessary for operating continuity.  

 

Last update: 26/09/2020 02:22