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Global Procurement
TecnimontThe 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.
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.
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Material Topics |
Reference scenario and main risks/opportunities |
Mitigation actions (including the policies pursued or implemented) |
|---|---|---|
|
- ETHICS AND COMPLIANCE |
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. |
- Implementation of the Group Code of Ethics and Organization, Management and Control Model as per Italian Legislative Decree 231/2001 (“231 Model”) |
|
- EMPLOYMENT |
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. |
- Implementation of the Group Code of Ethics and Organization, Management and Control Model as per Italian Legislative Decree 231/2001 (“231 Model”) |
|
- 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. |
- Technical and economic resources allocated to R & D; |
|
- ECONOMIC DEVELOPMENT |
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. |
- Implementation of the Group Code of Ethics and Organization, Management and Control Model as per Italian Legislative Decree 231/2001 (“231 Model”); - Promoting the Partner’s involvement even before the bidding stage, proposing innovative solutions which create added value |
|
- HEALTH AND SAFETY OF EMPLOYEES AND CONTRACTORS |
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. |
- Implementation of the Group Code of Ethics and Organization, Management and Control Model as per Italian Legislative Decree 231/2001 (“231 Model”) |
|
- CUSTOMER RELATIONS / IT RISKS |
Maire Tecnimont gives particular attention to the reliability of its IT systems as necessary to achieve business objectives. |
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: |
|
- 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. |
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. |
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.
