Risk Management | Trelleborg Group

Risk Management

Risks are associated with all business operations. Properly managed risks can lead to opportunities and value creation, while risks that are managed incorrectly can lead to damages and losses.

Trelleborg serves a broad range of customers in a variety of industries and niches. The business has a wide geographic spread. The Group has operations in 40 countries, sales are  conducted in just over 140 countries worldwide and manufacturing operations are carried out at 100 production sites. The business is diversified geographically and across a range of  different industries, which provides Trelleborg with an effective underlying risk spread. 


Demand for the Group’s products and solutions largely moves in line with fluctuations in global industrial production. With the divestment of the business area Trelleborg Wheel Systems,  he Group has become less cyclical since there used to be distinct seasonal effects especially in agriculture. The Group focuses on industries and geographies with healthy growth that can  report consistent earnings even when adverse cyclical fluctuations occur in individual industries.

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Risks

Trelleborg has chosen to group the risks into four areas.

Sustainability risks run as a common thread through these areas and relate to climate impact, work environment risks or risks in the area of human rights. It also includes the risks relating to failure to comply with laws and rules, both as a Group and among the Group’s suppliers.

Regulatory compliance risks

Regulatory compliance risks relate to Trelleborg having a global operation that is subject to a large number of laws, regulations and rules pertaining to, for example,

the environment, health and safety, trade restrictions, anti-competition regulations and currency regulations.

Strategic risks

Strategic risks include external factors that could impact Trelleborg’s operations, and internal factors that could impede opportunities to achieve the operation’s strategic goals.

Operational risks

Operational risks are risks that Trelleborg can itself largely manage and prevent, and which mainly pertain to processes, assets and employees.

Financial risks

Financial risks include interest rate and foreign exchange risks that could adversely impact the Group’s

earnings. Furthermore, there are financing risks and liquidity risks, which could result in difficulties in raising new loans or shareholders’ equity, as well as financial credit risks.

Regulatory Compliance Risks
 Risks
Focus 
Management and main activities 
 Violation of laws and permits  Compliance with applicable legislation  The Compliance Task Force leads and coordinates initiatives in this area.
Training seminars are arranged, including competition law and the EU’s General Data Protection
Regulation (GDPR). There is an established process for export control with a focus on embargoes
and trade restrictions, and there are procedures, for example, for approval of membership in
organizations and approval of collaborations with third parties.
Regular legal reviews are conducted with a focus on monitoring and ensuring compliance in the
Group companies. The Group’s internal controls, which are focused on regulatory compliance, have
been both expanded and formalized over the past few years.
During the year, the export control process was intensified with a particular focus on developments
in sanctions against Russia and Belarus.
 Corruption and fraud  Measures preventing fraudulent conduct  Established policies and procedures form the basis of the work in this area, which is supplemented
with routine training and acceptance letters, signed yearly, for the relevant employees. Trelleborg’s Whistleblower Policy also entitles all employees to report any
suspected legal or regulatory violations without repercussions.
Review and evaluation of agency and distribution agreements are regularly conducted. The
Group’s internal policy instruments have been reviewed, and Policy Quick Guides have been
produced to further increase the distribution and comprehension of regulations and the Group’s
core values.
 Risks in the area of
human rights		  Child labor/forced labor in the supply chain  Supplier reviews and supplier audits in the areas of risk are conducted based on the Group’s
geographic and materials risk assessments.

Operational Risks
Risks Focus  Management and main activities 
 Work environment
risks		  Health and safety  Risks in the area of health and safety are managed via the Safety@Work program, refer to page
128. Issues concerning employees are otherwise monitored as part of compliance with laws and
codes and diversity & inclusion.
 Products in environments
with elevated
risk levels		  Review of products
and solutions		  Not only risk assessments but also training and workshops are conducted to identify products
and contracts where it is especially important that the products comply with the quality and
functional requirements necessary in extremely demanding environments – for example, marine
infrastructure, marine hoses for oil and gas, healthcare & medical, and aerospace. Contracts and
processes concerning production and project management are also subjected to legal review and
risk assessment.
 Inadequate and inappropriate
agreements		  Examination of
agreements		  Not only comprehensive training, but also internal and external legal reviews of contract issues and
evaluation of contracts in prioritized areas. In 2022, AI-based tools began to be used to review and
assess risks in agreements.
 Negative environmental
impact		  Review of the sites’ local
environment and focus
on hazardous materials
and chemicals		  Environmental risks are identified in conjunction with all new construction and all acquisitions, with
a focus on chemicals management, rainwater and the risk of floods. Sites that are susceptible to
risk are routinely monitored.
The Global Chemical Task Force leads the work to phase out and replace substances that are
considered harmful and actively monitors developments in materials and chemicals legislation,
refer to page 38. In addition, there is ISO 14001 multi-site certification, which results in increased
standardized analysis and control.
 Risk of injury at sites  Protection of critical
sites		  External and internal analyses of the Group’s operations are carried out with regard to the most
critical sites. Also a more in-depth mapping of natural disaster risks is made, with a particular
focus on flooding and wind effects, including such risks that are related to climate change.
There are guidelines for new construction and upgrades of risk-classified sites. The number of
such sites upgraded to Highly Protected Risk (HPR) has increased over the past few years. One
aim is to improve the lowest performing and most critical sites.
 Disruptions to critical
IT systems		  Minimize disruptions  IT infrastructure service levels are in focus, as is the implementation of Group-wide upgrades in
a structured manner. Ensuring compliance with legal requirements in the countries in which the
Group operates is an important part, as is information security within and among the systems.

Strategic Risks
Risks Focus  Management and main activities 
 Commercial failures  New product segments,
major projects and
acquisitions		  In conjunction with all acquisitions, there is a due diligence program covering the areas of finance,
operations and legal. New products in selected segments such as healthcare & medical and aerospace
are approved centrally before development work begins. For the past few years, there has
been increased business support when establishing new product segments and for larger projects
concerning liability risk management, legal risks and new establishments of operations.
 Climate risks  Adaptation of production
and products		  Climate and other environmental issues drive local legislation and political instruments, and
Trelleborg adapts itself to these in the relevant production countries. At the same time, several of
the Group’s products and solutions help to reduce atmospheric emissions and protect society from
climate change. Work aimed at reducing the Group’s fossil-fuel
dependence was intensified during the year with respect to both own products and production
resources.
 Reduction of
CO2emissions		  In 2021, the Group resolved on new climate targets, “50 by 25”, for the period 2021–2025.
In line with society’s target to keep global warming below 1.5°C, Trelleborg’s climate target for
the period is to reduce direct and indirect CO2 emissions (Scope 1 and Scope 2) by 50 percent
relative to sales, with 2020 as the base year, and significant reductions of emissions along the
value chain (Scope 3).
For many years, energy efficiency has been the focus of the Manufacturing Excellence program.
 Political risks  Geopolitics and
sanctions		  In 2022, the Group started to discontinue its operations in Russia. The Group complies with
all relevant sanctions introduced as a result of the war in Ukraine and previous plans for a
manufacturing site in Russia were stopped early in the year.
The geopolitical situation is being monitored and is taken into account in all business plans.
 Supply chain
disruptions		  Material shortages
and delays		  There was greater focus on the supply chain in 2022 compared with previous years, as a result of
disruptions to global deliveries and the impact of the Coronavirus pandemic and the war in Ukraine
on supplies. The Group has well-established tools in place to ensure parallel supplies and evaluates
and balances purchasing between local, or global, suppliers, which limits disruption.

For full details on risk management:

Risk management from the Annual Report of 2022

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