Risk management

At Sulzer, risks are assessed regularly as part of the company’s integrated risk management process. The results are discussed with the management and the Audit Committee.

Risk	Risk exposure	Main loss controls
External and markets
Market assessment	Market developments that are assessed inappropriately could lead to missed business opportunities or losses.	Continuous monitoring and assessment of market developments
		Systematic midrange planning based on market developments and expectations
Geopolitical shocks	A geopolitical shock event could have an impact on operations and travel. Also, it could imply currency risks and default risks of countries and banks.	Monitoring of exposure in critical countries
		Monitoring of debt situation of countries and banks
		Continuous monitoring of raw material prices and inflation indicators
		Sulzer’s global presence mitigates the effect of geopolitical shocks
Strategic
Innovation	Failure in R&D and innovation activities could negatively impact the ability to operate and to grow the business. Insufficient investments in innovation to maintain technology leadership and develop innovative products.	A phased process, technical risk manageability assessments and key performance indicators to ensure quality of the development
		Product Development Council with strong focus on strategic plans and digitalization
		Prototypes and own test beds to test and validate products before market release
		Core Technology Council for research of basic technology
		Focus on innovation with strategic customers
		Innovation and ideation projects
		Implementation of an expert development program for key critical resources
Operational
Attraction and retention	Failure to attract, retain and develop people could lead to a lack of critical skills and knowledge, which hinders both daily operations and growth potential.	Ensuring that Sulzer’s people and performance efforts are anchored to the company’s values and behaviors
		Ongoing feedback through employee opinion survey “Voice of Sulzer”
		Robust internal communications strategy
		Ongoing engagement in workshops and collaborative activities
		Visibility and access to creating development experiences and opportunities
		Consistent approach to salary grading and benchmarking
Health and safety	An unsafe working environment could lead to harm to people, reputational damage, fines as well as liability claims and could have a serious economic impact.	Health and safety directives, guidelines, programs (e.g. Safe Behavior Program) and training
		OHSAS 18001 certifications
		Monthly health and safety controlling and regular audits
		Global network of health and safety officers
		Immediate implementation of COVID-19 preventive measures in all legal entities and workplaces, including: informing and training employees on COVID-19 preventive measures; implementation of risk assessment procedures, travel ban for high-risk countries and approval concepts for business travel; implementation of remote working; implementation of remote video to support final acceptance procedures in manufacturing
Environmental	Environmental damage could lead to harm to people and nature, reputational damage, fines as well as liability claims and could have a serious economic impact.	Mitigation in comprehensive environmental due diligence (EDD) projects for acquisitions and divestitures
		Elimination of environmentally damaging substances through Prohibited Substances List
Compliance	Non-compliant or unethical behavior could lead to reputational damage, fines and liability claims.	Active fostering of high ethical standards by tone from the top and middle management
		Continuous monitoring and assessment of potential exposures
		Sulzer Code of Business Conduct and a number of supporting regulations (e.g. anticorruption, antitrust, trade control)
		Third-party due diligence process
		Global network of compliance and trade compliance officers
		Compliance training (incl. e-learning) and audits
		Speak-up culture, compliance hotline and sanction checks
Quality of products and services	Failure of high-quality products and services could lead to repeated work, reputational damage or liability claims.	Quality management and assurance systems tailored to specific businesses
		Third-party accreditation
		Competence development programs and training of employees
		Test centers
Business interruptions	Business interruption, such as a fire, could cause damage to people, property and equipment. It could have a negative effect on the ability to operate at the affected site. Security incidents could impact the IT infrastructure or systems, which could result in a business interruption. Business interruption caused by pandemic-related lockdowns could have an impact on operations and supply chain and thus could lead to serious economic impact.	Crisis and emergency management systems (at global and local level)
		Risk management policy and guidelines
		Global manufacturing footprint and global procurement
		IT security standards, measures and incident response team
		Disaster recovery plans in IT
		Implementation of COVID-19 business interruption response team to support businesses in becoming qualified as essential service providers
		Global monitoring of COVID-19-related governmental decisions
		Enhancement of IT infrastructure to cope with higher data volumes during extended remote work
Financial
Financial markets	The unpredictability of financial markets may have a negative effect on Sulzer’s financial performance and its ability to raise or access capital.	Group financial policy
		Foreign exchange risk policy
		Trading loss limits for financial instruments
Credit	Credit risks arising from financial institutions and from customers could have a negative effect on Sulzer’s financial performance and ability to operate.	For financial institutions, only parties with a strong credit quality are accepted (third-party rated)
		Individual risk assessment of customers with large order volumes
		Continuous monitoring of country risks
Liquidity	Failure in liquidity risk management may have a negative effect on Sulzer’s financial performance and its ability to operate.	Continuous liquidity monitoring
		Management of liquidity reserves at group level
		Cash flow program to optimize liquidity and cash flow management
		Efficient use of available cash through cash pooling