The objective of the Perstorp Group’s risk management process is to proactively identify, evaluate and manage risks as early as possible in order to achieve both operational and strategic goals.

Managing risks

Risks are assessed and managed at many different levels and locations within the Perstorp Group and for different purposes.

Corporate Finance has the global responsibility for the assessment of the Group’s financial risks. For details see Note 3.
On group level, based on identified risk areas the internal control program addresses risks of financial misstatements as well as risk associated with business ethics.

On site level a combination of results of insurance audits performed by a third party, and our own systematic risk assessments, are reported to group level to ensure relevant levels of mitigation.

In relation to third party product certifications, specific risk assessments are required. E.g. for our ISCC certifications of our pro-environment product range and for products required to meet food and animal feed standards.

Covering all our sites and offices, we perform overall as well as project based risk assessments concerning occupational health and safety, as a part of our Care 365 program.

For risks found that may cause harm to human health and safety, the environment or financial performance, there are defined risk levels for when these need to be escalated. The most material risks are reported to the Board. Action plans to reduce and control those risks are developed, assigned and reviewed during the year. The results of risk assessments are also used as input to strategic processes and budget processes.

During the year, Perstorp has initiated work to further develop the process around risk management, and more specifically how risk management processes can be better integrated to include different perspective that include both directly financial and non-financial risks such as sustainability related risks.

Perstorp has categorized risks into three categories, described here below:

Strategic risks

Strategic risks are those that could have a negative impact or threat the Group’s ability to develop in line with previously set strategies covering up to a five year timeframe.

Operational risks

The operational risks are those that may have a direct impact on the Group’s daily business up to a one year time horizon.

Financial risks

Financial risks address exposure within the Group’s financial operations and other risks that may have a direct financial impact such as through fines, and other forms of directly financial litigation.

Risk evaluation

The Perstorp risk evaluation is based on a number of dimensions including financial, reputational, compliance, operational consequences, customers and market share, potential environmental harm and potential human harm.
The risks are evaluated in terms of likelihood within the strategic planning period, the effectiveness of current mitigation efforts and the possible consequences.

Strategic risks

Operational risks

Financial risks

Corporate governance report

The Perstorp Group’s core values of focused innovation, reliability and responsibility are also central to corporate governance. Corporate governance includes the continual process of controlling and improving decision-making and business strategies, defining clear areas of responsibility and identifying and evaluating opportunities and risks for the Group. The overall aim is to maintain and develop order so that the business is controlled reliably and we are well equipped to face the development challenges and changes of the future. Corporate governance within the Perstorp Group is performed through the Annual General Meeting, the Board of directors and the President in accordance with the Swedish Companies Act. The Group does not have a formal requirement to follow the Swedish code of corporate governance.

General meeting

The General Meeting is the forum where shareholders make certain decisions about Perstorp Holding AB and its subgroup subsidiaries. The Annual General Meeting was held on May 16th 2018, at which the annual report for the 2017 financial year was adopted together with the proposal for distribution of profits. The Board of Directors was re-elected at the meeting.

Board of directors

As of the end of 2018, the Board of Directors consists of seven members, all nominated and elected by the company owners. The individuals re-elected to the Board at the 2018 Annual General Meeting are Tore Bertilsson, Fabrice Fouletier, Jan Secher, Karin Markides, Brendan Cummins, Ragnar Hellenius and Claes Gard. In addition to the aforementioned individuals, the Board also includes three employee representatives.

The Board's responsibilities are regulated by the Swedish Companies Act and the formal working procedures, which are approved by the Board once per year. These procedures outline the Board's assignments and which decisions must be taken at Board level. The working procedures also regulate the division of responsibility between the Board, its committees and the President. The Chairman leads the Board's work. The division of responsibilities among Board members does not extend beyond certain special assignments for the Chairman.

During 2018, eight scheduled Board meetings were held, as well as one statutory convening meeting and two extra board meetings. Minutes were kept at all meetings. On average, attendance at Board meetings for ordinary Board members was 95%. Other employees also attended meetings, either to make presentations or give specialist information prior to key decisions. Every month the Board received a written report presenting and analyzing the development of the Group and the earnings and financial position. Preparatory materials were sent to Board members before each Board meeting. The President was also in continuous contact with the Chairman of the Board. The following points were addressed at each Board meeting:

• •

  Responsible Care report, status report from the President

• •

  Financial position and outlook

• •

  Investment decision for projects worth more than SEK 15 m

Other important matters:

In addition to these fixed agenda items, several main subjects such as the budget, forecasts, refinancing, divestments and financial structure were addressed during the year. The Perstorp Group’s core values of focused innovation, reliability and responsibility are also central to corporate governance. Corporate governance includes the continual process of controlling and improving decision-making and business strategies, defining clear areas of responsibility and identifying and evaluating opportunities and risks for the Group. The overall aim is to maintain and develop order so that the business is controlled reliably and we are well equipped to face the development challenges and changes of the future. Corporate governance within the Perstorp Group is performed through the Annual General Meeting, the Board of directors and the President in accordance with the Swedish Companies Act. The Group does not have a formal requirement to follow the Swedish code of corporate governance.

Audit committee

The Board is served by an Audit Committee, which focuses on securing the quality of the Group's financial reporting and risk management, and the committee is therefore also close to the development of control instruments for internal control. An important activity is to follow up and assess the external audit. The committee does not have decision-making rights. Decisions shall be made by the Board.

At the end of 2018, the Audit Committee consisted of the following members: Fabrice Fouletier, Claes Gard, Ragnar Hellenius and Tore Bertilsson. During the year, the committee held six ordinary meetings.

Remuneration committee

The Board is also served by a Remuneration Committee. This committee's task is to propose principles for remuneration and other employment terms for the President and senior executives. The committee also prepares the terms for global incentive schemes and makes an assessment of the schemes. The committee has certain decision-making powers.

At the end of 2018, the Remuneration Committee consisted of Board members Tore Bertilsson, Brendan Cummins, Fabrice Fouletier and Ragnar Hellenius. The committee held two ordinary meetings during the year, at which minutes were taken.

President & Executive leadership team

The President of the Group, Jan Secher, is also elected by the Board as the CEO of the parent company. He exercises ongoing control of the Group. The EVPs of the Business Areas Advanced Chemicals & Derivatives and Specialties & Solutions report to him along with the EVP Supply chain, EVP Operations, EVP Regions & Group Management, EVP Finance, Legal & IT and EVP Innovation. The President manages the business in accordance with the instructions concerning the division of responsibilities between the Board and President adopted by the Board. The work of the President and Board is assessed annually. 
During the first quarter 2019, Perstorp announced a new organization consisting of three new Business Areas (BAs) to manage our different customers
• BA Specialty Polyols & Solutions: BU Penta, BU TMP & NEO and BU Formates
• BA Advanced Chemicals: BU Oxo and BU Plasticizers
• BA Animal Nutrition: BU Feed Additives and BU Acids & Salts

along with the functions
• Supply Chain & Operations
• Global Procurement
• Innovation
• Communications & Sustainability
• Finance, Legal & IT
• People & Culture and CEO Office

External auditors

Perstorp's auditor is elected for a term of office of one year. Auditing firm PricewaterhouseCoopers AB (PwC) is the appointed auditor of the company with Michael Bengtsson being the lead auditor. The Board's and Group Management's aim is to have a close relationship with the auditors, to the extent that they shall be kept well informed about relevant issues concerning the accounts, reporting procedures and management of the company's/Group's assets.

There is, therefore, a continuous dialogue with the auditors and they participate in at least one Board meeting per year. The auditors receive the minutes of Board meetings, documents relating to Board decisions, and the monthly financial reports for the Group. During 2018, PwC performed assignments relating to the audit in addition to regular auditing work. On all those occasions, the Group emphasized that the additional services should not compromise the independence of the audit, which was also been carefully examined by PricewaterhouseCoopers.

Internal control

For Perstorp, the concept of internal control is fundamental and involves the Group's capability of implementing an effective system for control and follow-up of the company's activities. It also involves ensuring that rules are followed, both with regard to external legislation/regulation and internal guidelines/control documents. An important part of the practical work on internal controls, furthermore, is to identify risks and ensure that they are managed efficiently. The purpose is to minimize risk exposure as far as possible in selected areas while also ensuring the opportunities are exploited as desired. The Group's organization is adapted to meet the requirements for good internal control and working methods are characterized by organizational transparency with a clear division of responsibility. 

The Group's financial reporting manual, together with the business systems, are important control instruments that enable reliable consolidation and financial reporting. Group reports are produced once per month following well-established procedures, and the outcome is always presented in a report that includes extensive analysis. Work on the year-end accounts involves a number of people at Group, department and company level, and the summarized results are reported back continually to management functions and the Board. For several years, the Group has performed an extensive annual self-assessment of internal controls, with the majority of the subsidiaries assessed in 2018. The purpose is to identify key control points for the various departments, analyze procedures, follow development in relation to previous activity and thus ensure that internal controls are at a good level and remain so. The continued implementation of a new ERP system in several of our companies in Sweden has led to improved capabilities for performing and ensuring good internal control. The assessment has been complemented with a partly expanded verification operation by the company's auditors for certain areas. In relation to this, special follow-up and site visits has been carried out from the central level within the Group. Work aimed at securing good internal control is a constantly ongoing process.