Approach
Pirelli’s Enterprise Risk Management model forms part of three key phases in the decision making process:
- strategic planning (medium/long term);
- operational planning (annual and quarterly);
- new investment projects.
Pirelli’s Risk Model was evaluated as the best-inclass in 2011 in the “Autoparts and Tyres” sector by the SAM Group in an assessment for the Dow Jones Indexes in 2011.
| Risk analysis in strategic planing | Risk analysis in the annual and quarterly operational planning | Risk analysis in new investment projects |
Risk analysis in investment projects Pirelli’s risk model was developed further during 2011, becoming a support tool in the decision- making process relating to investment initiatives.
The set of characteristic information for the traditional analysis of investment projects was supplemented with the “risk dimension” based on:
- a detailed analysis of the economic, political, safety and operational risk of the country where the investment is intended to be made;
- the estimate of the “risk adjusted” cash profiles generated by the investment and the degree of volatility of the Net Present Value (NPV@risk) in relation to the events which are able to generate changes to the business plan results.
The inclusion of the risk variable in the analysis of investment projects and the possibility of comparing them with the expected returns, will contribute to:
- enhance further the Top Management’s awareness and guide the risk management strategies;
- permit a comparative evaluation of the investment initiatives to be made.