Risk Governance
The Board of Directors of Pirelli examined and approved a model to monitor and manage the risks, which are liable to prejudice the achievement of Pirelli's strategic objectives, also in line with international best practices.
The Enterprise Risk Management (ERM) model of Pirelli is based on the framework “Enterprise Risk Management Integrating with Strategy and Performance” updated by the Committee of Sponsoring Organization of the Treadway Commission (COSO).
Such framework provides a robust methodological background to identify the most appropriate mitigation strategy to safeguard strategical objectives as well as create value for stakeholders.
The Board is responsible for supervising the risk management process so that the risks assumed in the business are consistent with the strategies of the Company. Furthermore, in line with its top management policy-making mission, the Board defines the ‟risk appetite” (the attitude to risk/acceptable risk threshold) and establishes the guidelines to manage significant risks which are liable to prejudice the achievement of the strategic objectives or affect critical business assets.
Non-executive directors receive regular risk management induction on Enterprise Risk Management methodology and approach as well as adopted techniques and hot topics emerged from risk assessments.
The Enterprise Risk Management & Insurance department is led by the Head of Finance, M&A & Risk Management that directly reports to the Head of Finance and Services.
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The Board adopts a structured risk management model that allows the Group to promptly and completely identify risks as well as manages uncertainty in a proactive way, rather than simply taking reactive stance.
It is also responsible for the proper functioning of the entire internal control system and assesses the adoption of strategic decisions and tools to reduce impact or probability and/or transfer the risk. The Board of Directors plays a central role with reference to the “governance” of the risks management model. It is responsible for supervising the risk management process so that the risks assumed in the business are consistent with the strategies (so-called monitoring action).
The Board, in line with its top management and strategic policy-making mission, defines the ‟risk appetite” (risk attitude) and establishes the guidelines to manage risks which may jeopardize the achievement the business objectives or erode critical corporate assets (tangible and intangible).
In this purpose it’s necessary to proceed at the identification and assessment of the principal risks relating to the Company and its subsidiaries, to ensure these risks are correctly monitored (Risk Assessment) and to maintain the overall levels of exposure to risk within the risk threshold assessed as being "acceptable" (risk appetite).
The Pirelli integrated risk governance model is based on three macro risk families that guide the risk management objectives, the control model and the governance bodies.
The Board of Directors is supported by a Risk Management Managerial Committee.
The Risk Management Managerial Committee has the following responsibilities:
- to adopt and promote a systematic and structured process to identify and measure the risks;
- to examine the information concerning internal and external, existing and future risks to which the Group is exposed;
- to propose strategies to respond to the risk in relation to the overall and detailed exposure to the various categories of risks;
- to propose the implementation of a risk policy in order to guarantee that the risk is reduced to "acceptable" levels;
- to monitor the implementation of the strategies adopted in response to the risk defined and compliance with the risk policies adopted.
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