On a global and regional scale several global trends, not least population growth, resource scarcity and climate change, can be expected to affect Yara’s business. At the same time, these challenges offer a range of business opportunities where Yara is well positioned to offer solutions that meet market demands. The development of fertilizers with a low carbon footprint and solutions for water-scarce agriculture are key examples of Yara’s response to such global challenges.
Yara’s most significant market risk is related to the margin between nitrogen fertilizer prices and natural gas prices. Although there is a positive long-term correlation between these prices, margins are influenced by the supply/demand balance for food relative to energy.
Yara’s total risk exposure is analyzed and evaluated at corporate level. Risk evaluations are integrated in all business activities, both at corporate and business unit level, increasing Yara’s ability to mitigate risk and take advantage of business opportunities.
The Board carries out annual reviews of the company’s most important areas of exposure to risk and its internal control arrangements. Reference is made to pages 26-31 in the Financial Report for a more comprehensive description of Yara’s risk management.
In 2011 Yara informed about a suspected case of unacceptable business behavior in the company. An internal investigation launched by the Board of Directors looked into irregularities related to Yara’s business conduct in Libya, India and its Swiss operations. Conducted by an external law firm, the investigation was completed in June 2012. It concluded that several unacceptable payments were offered or made by Yara. All findings have been shared with The Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime, which continued investigating through 2012 and into 2013.
The compliance function in Yara has undergone a significant strengthening since 2009, starting with an increase in central compliance resources, the launch of a company-wide training program and a review of key commercial agreements. In response to the investigation findings described above, 2012 compliance activities were focused on the roll-out of a renewed and expanded employee training program, preparations for the introduction of a comprehensive business partner integrity due diligence (IDD) system and a review of Yara’s joint venture governance and steering systems.
The review and further roll-out of IDD and joint venture governance systems, including acquisition process and risk assessment, remain key compliance focus areas for 2013.