Risk Management Structures and Tools

Risk Management Structures and Tools

This groupwide system draws on existing organizational and reporting structures, supplemented by additional elements:

• The risk management handbook: The handbook contains the risk management system’s principles and processes. It explains reportable levels of risks and how risks are to be covered and mapped.
• The risk management regulation: It stipulates groupwide reporting requirements, including when a specific committee must be informed.
• The role of risk management coordinator: This coordinator is responsible for the risk management system and is supported by local risk coordinators.
• The risk list: In this list, we record each specific risk facing our divisions and other corporate sectors. Reporting is mandatory for individual risks where the effect on earnings would exceed €5 million.

Risk Identification

WACKER identifies risk on two levels: divisional and Group. We employ various instruments to detect and recognize risk. These include monitoring order-intake trends, market and competition analyses, customer talks, and ongoing observation and analysis of the economic environment.

Basis of Our Internal Control System (ICS)

Assessment, Quantification and Management of Risks

We analyze each identified risk’s probability of occurrence and potential effect on earnings. Corporate Controlling compiles a monthly report to inform the Executive Board of current and expected business developments and their associated risks. We evaluate risks and opportunities at regular meetings with our divisions and weigh them up against each other.

Corporate Controlling’s task is to ensure that our risk management standards are implemented and our risk management process enhanced. It is responsible for recording all significant risks groupwide and evaluating them systematically. Significant risks and those endangering the company’s continued existence are communicated immediately via ad-hoc reports. As WACKER’s business divisions are responsible for their own results, this process is closely interwoven with operational controlling. Individual divisional risks are identified and evaluated on a monthly basis.

The Corporate Finance and Insurance department is responsible for managing financial risks and customer receivables.

Compliance Management

WACKER’s ethical principles of corporate management exceed the statutory requirements. The Compliance Management department is responsible for ensuring that these principles and all related legislation are observed company-wide. Training courses on compliance raise employees’ awareness of the relevant risks and convey binding rules of behavior for daily work routines. These aspects are covered by WACKER’s compliance regulation, the groupwide Code of Conduct and company rules worldwide. WACKER published a new Code of Conduct at the end of 2023. It sets out new value pairs, each of which is illustrated by guiding principles and core messages (for more information, see the “Principles of Corporate Ethics” section in the Declaration on Corporate Management).

Employees are instructed to inform their supervisors, the compliance officers, the employee council or their designated HR contacts of any violations that come to their attention. Any reported or known breach of the law is investigated and punished accordingly. They also have the option of reporting suspected violations within the company anonymously via a protected channel. We have a groupwide whistleblower system in place in line with European Union (EU) requirements. It enables WACKER’s employees, business partners and stakeholders who detect potential violations of rules and regulations to report them to the company – directly, confidentially and anonymously.

The Group’s compliance officers are responsible for ensuring that the compliance system is observed, and are on hand to advise employees and contacts on all compliance-related matters.

Prevention is a key aspect of the compliance officers’ work. They train, inform and advise employees and management on, for example, strategies and measures to prevent corruption and economic crime of any kind. In 2023, no major infringements of compliance were identified that were subject to the above-mentioned reporting threshold of an effect on earnings of more than €5 million.

WACKER has a compliance management system in place worldwide that is continuously reviewed and enhanced in accordance with internationally recognized auditing standards. We carry out ongoing compliance risk assessments throughout the Group, with Global Compliance collaborating with the relevant corporate functions. Targeted investigations are carried out in the event of suspected compliance violations. In addition, ad hoc audit procedures are carried out as a matter of routine (unaudited).

Corporate Auditing

The third line of defense is provided by WACKER’s Corporate Auditing department, which acts as an independent monitoring body for the Executive Board. It monitors the effectiveness of the internal control systems at WACKER’s sites, compliance with internal and external requirements and efficacy across various operational processes and systems. When setting up an internal control system, the operational units must apply certain principles, such as a policy of dual control. These principles are defined in an internationally applicable regulation, where they are explained in more detail for critical functions.

On behalf of the Executive Board, Corporate Auditing performs regular, mainly process-specific, reviews of all relevant functions and corporate units, focusing on internal control systems. Audit topics are selected using a risk-driven approach. The Audit Universe, which covers all the Group’s main functions, sites and companies, is the basis of Corporate Auditing’s topics. It also includes risk management reporting, as well as the reports and information provided by the corporate departments, business divisions and major joint ventures/associates. The auditing schedule is supplemented and approved by the Executive Board, and discussed with the Audit Committee. If necessary, the schedule can be adjusted flexibly during the year to accommodate any changes in underlying conditions.

Any measures derived from the audits for optimization of processes and the internal control system are implemented and systematically monitored by the Corporate Auditing department. The latter provides the Executive Board and Audit Committee with regular reports on the results and implementation status of the various measures.

Nothing came to our attention in the year under review that would endanger the proper functioning of the internal control systems or have an effect on earnings that exceeded the above-mentioned reporting threshold of €5 million.

Audits

When auditing our annual financial statements, the external auditors examine our early-warning system for detecting risks. The auditors then report to the Executive and Supervisory Boards.