Fiat Group defines a risk as any event that could negatively or positively impact its ability to achieve its objectives-possible or eliminate them where necessary. Adapted from the framework established by The Committee of Sponsoring Organizations of the Treadway Commission (COSO) to the specific needs of the Group, in 2010 that model was revised to reflect the experience acquired over the years and indications of best practice that emerged from a comparison with other industrial groups. In particular, risk drivers were remapped into new, refined, or reformulated groups to better respond to new requirements or emphasize significant issues (climate change, macro-economic developments, joint ventures, etc.).
Some 50 risk drivers have been identified, which are further broken down into approximately 85 potential events. This update was managed and coordinated by group central functions and, applying a top-down approach, was extended to all operating sectors and companies. In 2012, ERM risk drivers will be integrated with water-related risks (quantity and quality of water withdrawal, regulatory changes and conflicts with stakeholders).
The classification of likelihood of occurrence and the potential impact on profitability, business continuity and reputation (or a combination of these elements) – which, analyzed jointly, determine the significance of the risk – remained unchanged. For events that exceed a predetermined significance threshold, existing measures are analyzed and future containment measures, action plans and individuals responsible determined. This process, which is aided by a dedicated information system, is based on a bottom-up approach that, beginning with individual business units, enables generation of a summary report for each sector, including any containment measures to be implemented. Sector CEOs and CFOs are required to approve these reports, while the Group Controller is responsible for their coordination and consolidation into the Group Risk Report. This document is submitted annually to the Internal Control Committee, which assists the Board of Directors in verifying the adequacy and effective functioning of the Internal Control System.
Chrysler Group, consolidated for accounting purposes in Fiat S.p.A., will be integrated in the ERM methodology in 2012.
The 2011 assessment revealed various types of risk related to climate change, which include risks concerning regulations, consumer preferences for eco-sustainable products, reputational impact on the community where the Group operates and increase in energy costs. As in the past, the Group has demonstrated continuous appropriate management of these risks through the most effective tools, gearing research and investments towards products with an ever decreasing environmental impact, promoting low-emission vehicles, improving sales force skills to convey the benefits of the ecological features of the Group’s vehicles to customers, adopting efficiency projects for reducing plant energy consumption and using renewable energy sources.
Certain specific risks¹ are monitored by the appropriate organizational entities. For example, risks associated with the potential impact of the Group’s industrial activities on the environment and climate are monitored and proactively managed by the Environment, Health and Safety (EHS) unit for each sector in accordance with the Environment pillar of World Class Manufacturing. Plant managers are responsible for the operational aspects, and their activity is coordinated centrally by the Group EHS structures.
In addition, Risk Management S.p.A., the Fiat Group company responsible for control of pure risks (e.g., fires, explosions, natural disasters) and insurance coverage for those risks, plays a central role in the management of events that could potentially impact the continuity of operations or the integrity of physical assets (in particular, the Group’s plants).(1) For additional information on the management of financial risks, please refer to the Consolidated Financial Statements.