Investor Relations

Risk management 2013

Risk management 2013

Corporate risks

Yara’s Board of Directors and Executive Management conduct risk assessments relating to various dimensions and aspects of operations, to verify that adequate risk management systems are in place. Yara’s global reach and the nature of its operations present a complex risk picture. Strategic and operational risk include political developments and financial conditions as well as compliance-related risks, including a risk of failure to comply with all applicable international standards and local legislation on issues such as human rights, labor rights and corruption.

Compliance risk management is done through training and education of employees, a central and regional Ethics and Compliance function, and a range of channels for dialogue on dilemmas, which include access to anonymous whistleblowing, available in 50 languages.

Yara has developed a Business Partner Code of Conduct that takes into account internationally recognized and endorsed standards in key areas such as international human rights, business ethics and labor conditions. Also incorporated in Yara’s steering system is the Integrity Due Diligence process for business partners, identifying potential issues including environmental, human rights or corruption issues.

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 in the Financial Report for a more comprehensive description of Yara’s risk management.

Investigation and corporate penalty

In 2011 Yara announced a suspected case of unacceptable business behavior in the company. An external Yara 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 and communicated in June 2012. It concluded that several unacceptable payments were offered or made by Yara. All documentation was made available and findings were shared with The Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim).

In January 2014 Yara acknowledged guilt and accepted a corporate fine of NOK 270 million and confiscation of NOK 25 million imposed by Økokrim. The fine is related to historical irregularities linked to the establishment of Lifeco (Libya), an unrealized project in India and contracts with a Russian supplier. The confiscation relates to earlier phosphate deliveries.

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, 2013 compliance activities continued to focus on a renewed and expanded employee training program, implementation of a comprehensive business partner integrity due diligence (IDD) system and close cooperation with other Yara functions such as the Strategy and Business Development team. Risk assessments, business partner IDDs and employee training remain key compliance focus areas for 2014.

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