Approach


Philsophy: Turn Risk into a choice

The assessment and prevention of the risks that could affect the Group’s values and objectives has always been an integral part of the innovative spirit and professional excellence on which Pirelli’s historical identity was founded.
Risk is a fact of business life: a preventive analysis of risk factors and an assessment of their impact on a company performance are essential prerequisites for value creation. On these bases, decision-makers are allowed to make choices knowingly.

Mission

Considering that risks represent a key component of business, the new integrated risk governance model (Enterprise Risk Management) has the following mission:

  • “to manage” risks in terms of prevention and mitigation;
  • “to seize” proactively the opportunity factors;
  • to disseminate the “culture” of the value of risk within the Company, in particular, in the strategic planning and operating processes and in the most significant business choices;
  • to assure transparency in relation to the risk profile assumed and the management strategies implemented, based on periodic and structured reporting to the Board of Directors and to the Top Management and adequate information to the shareholders, and more in general, to the so-called stakeholders.

Pillars

In harmony with these aims, Pirelli’s Enterprise Risk Management is:

  • enterprise-wide: extended to all types of potentially significant risks/opportunities;
  • value-driven: focused on the more significant risks/opportunities in relation to their capacity to prejudice the achievement of Pirelli’s strategic objectives or to erode critical corporate assets (so-called Key Value Drivers);
  • top-down: the Top Management identifies the priority risk areas and the events of greatest impact for the business;
  • quantitative; where possible, based on an accurate measurement of the impacts caused by the risks on the expected economic/financial results in relation to their probable occurrence;
  • integrated in the decision-making/business processes and, in particular, in the strategic planning and operational process.


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.

It is worthwhile noting that the Enterprise Risk Management model goes beyond the strategic, operative planning and analysis of investment projects through a continuous monitoring and management of operational risks.



The analysis of operating risks forms an integral part of the Group's internal control system; ad hoc methods are developed for each risk area with the aim of identifying the vulnerabilities of the control systems and the possible impacts for the Group.
At present the analysis has concerned business interruption risks, risks associated with information systems, risks relating to the supply chain and corporate criminal liability risks. The areas of vulnerability which emerged are subject to a continuous follow-up activity performed by the Operating Risks Committee.

Last Revised: 15 Nov 2013