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Risk Management

As a group with operations in different parts of the world, Gränges is exposed to various risks and uncertainties. Gränges’ risk management process entails to identify, assess and reduce risks related to the Group’s business and operations.

Market risks

Market risks are managed and controlled by the corporate functions and by the regions in accordance with established guidelines and procedures.

Risk description and consequence

Macroeconomic conditions, technological transformations and industry dynamics are factors that impact demand for Gränges’ products.

Light vehicle production is an important driver of Gränges’ sales as customers in the automotive industry account for around half of Gränges total sales volume. During an economic downturn, there is normally a decline in vehicles production, which can reduce demand for aluminium products used in vehicles.

The electrification of the automotive industry is accelerating and is driving demand for new solutions and components for cooling and heating. Although Gränges is well positioned to benefit from this development there is a risk that other technologies will emerge over time and that Gränges’ current and future technology become outdated.

Dissatisfied customers can adversely affect the company’s profitability and market share and may also pose a reputational risk.

Risk mitigating activities

  • Global presence: Gränges’ global presence on three continents balances the shift in demand throughout the economic cycle.
  • Continuous monitoring: Gränges continuously monitors the development in different markets, and proactively assess external risks and opportunities that may influence the company’s strategy and operations.
  • Diversified portfolio: A more diversified product portfolio reduces Gränges’ cyclicality and reduces the company’s dependence on the automotive industry.
  • Research and innovation: Extensive R&I enables Gränges to continue to develop advanced materials and solutions to meet new demands.
  • Customer collaboration: Gränges works closely with customers in product development for future applications to ensure a continued high quality and adherence to customer requirements.
  • Global customer satisfaction surveys: Gränges conducts global customer satisfaction surveys to track customers’ perceptions of the company and its products.

Risk description and consequence

Supply chain risks mainly relate to social, environmental and ethical risks in Gränges’ supply chain. Mismanagement of these risks may lead to undesirable effects on the supply of input materials for Gränges. It can also lead to reputational losses.

Social supply chain risks and human rights violations are mainly related to indigenous rights in the extraction, mining and smelting activities. Extractive activities also carry a risk of forced and child labour, although there are few reports of this in aluminium mining. Health and safety risks are present throughout the value chain.

Environmental supply chain risks mainly occur in mining activities where there are risks related to water consumption, leakage, noise from heavy vehicles, air emissions, and significant alterations to the landscape due to open-pit mines. It can also contribute to biodiversity loss, increased carbon emissions, and soil erosion. Further, refining and smelting activities are very energy- and water-intensive processes and much of the energy comes from hydroelectricity which is a renewable source but has other environmental impacts.

Corruption risks are mainly linked to mining approvals, regardless of the country’s level of economic development or political system. A few countries in Gränges’ supply chain are deemed to have a higher risk for corruption, according to Transparency International’s Corruption Perceptions Index for 2019.

Risk mitigating activities

  • Supplier Code of Conduct: Gränges has a Supplier Code of Conduct which all significant suppliers are requested to sign. The intention is to increase awareness and improve transparency of responsible and sustainable business practices in Gränges’ supply chain. By signing, suppliers declare to observe all applicable laws and regulations, including the ten principles of the UN Global Compact, and to promote the implementation of these principles in their own supply chains.
  • Supplier assessments: Gränges periodically assesses supply chain sustainability performance and risks and makes sure that suppliers adhere to the Supplier Code of Conduct. The purchasing teams use different tools for such assessments, including supplier score cards and site visits at suppliers.
  • Updated responsible sourcing programme: Gränges has during 2019 updated its group-wide responsible sourcing programme which will be implemented starting from 2020. The company plans to regularly screen its supplier base and identify potential risk suppliers through evaluating suppliers’ environmental, social, and corruption risks in different sectors and countries. Suppliers assessed as having potential sustainability risks will be invited to perform a sustainability assessment. Gränges will use the results from the assessment to decide how to manage suppliers and improve supplier performance through for example on-site workplace audits.

Risk description and consequence

Energy price risks relate largely to changes in energy prices that can adversely affect Gränges’ operating profit. Gränges is mainly exposed to price changes in electricity and natural gas, but the price of other energy commodities may also affect Gränges’ operating profit directly and indirectly. Long term changes to market prices will eventually affect Gränges’ operating profit if changes are not automatically transferred to the customers.

Risk mitigating activities

  • Hedging and delivery agreements: Gränges uses hedging and delivery agreements to secure future energy prices and supply. Financial hedges and physical fixed-price contracts may be used up to two years before delivery.

Risk description and consequence

Political risks relate mainly to changes in trade legislation or sanctions against individual countries or organizations where Gränges or its supply chain has operations or market activities. Gränges’ production sites are located in Sweden, China, and the US, and its customers are located in around 40 countries. Markets and operations are affected by the political and economic environments within and between these countries. Political risks affect Gränges’ ability to meet the demands of its customers.

Risk mitigating activities

  • Continuous monitoring: Gränges closely monitors political risks, particularly regarding legislation for cross-border trade.
  • Flexible production set-up: Gränges has production sites on three continents which implies a flexibility to transfer production and re-route supply flows should political changes have a negative impact on the current setup.


Operational risks

Operational risks are managed and controlled by the corporate functions and by the regions in accordance with established guidelines and procedures.

Risk description and consequence

Production disruption risks are connected to sufficient input materials which Gränges is dependent on, mainly primary aluminium but also recycled aluminium, alloying elements and indirect materials. Insufficient supply would imply that Gränges cannot produce certain products.

Production risks are also connected to critical machine breakdowns or calamities such as a fire, which could damage equipment.

Risk mitigating activities

  • Supplier agreements: Gränges has agreements with suppliers in each market to ensure deliveries based on estimated volumes.
  • Own production: Gränges has own cast houses in the production facilities which makes the company less sensitive to supply issues regarding for example aluminium slabs.
  • Maintenance plans and machinery: Gränges has maintenance plans to manage critical machinery. The company also ensures access to spare parts and service staff to continually maintain critical machinery. Furthermore, Gränges has invested in state-of-the-art fire protection systems and customary insurance policies.

Risk description and consequence

Quality and efficiency risks are mainly connected to defective products and insufficient process stability, and are often due to unplanned stoppages at production plants.

Risk maitigating activities

  • Operational excellence programmes: Gränges ensures highquality products and efficient production processes through its programmes for lean operations.

Risk description and consequence

Environmental risks are mainly related to emissions to water, soil and air or releases of environmentally hazardous substances resulting from incidents and accidents in Gränges’ production facilities, such as fire, oil spill, or leak of hazardous substances.

Emissions to air, in terms of carbon dioxide, nitrogen oxides and particulate matter, come from burning fossil fuels and particularly natural gas and liquefied petroleum gas. Emissions of oil are linked to cold rolling operations in which oil is used to cool down the mill and lubricate the interface between the rolls and the material. Such events may have financial, nonfinancial, as well as regulatory repercussions.

In line with the Aqueduct Water Risk Atlas developed by the World Resources Institute, Gränges’ operations are located in areas with various water risks. The production sites in Finspång and Newport are situated in areas with low-to-medium risk, whereas the Huntingdon and Salisbury facilities are in mediumto- high risk areas. The plant in Shanghai is situated in a high-risk area.

Mismanagement of water risks can lead to water shortage and/ or bad water quality; however, no water source is considered to be significantly affected by the water withdrawal or discharge from Gränges’ operations.

Risk mitigating activities

  • Daily monitoring and management: Gränges monitors and manages emissions to air as part of the daily operations. Compliance is a prerequisite for Gränges’ continued licence to operate. Local authorities continually monitor compliance to ensure that emissions of nitrogen oxides, sulphur dioxide, particulate matter, volatile organic compounds (VOC) and, in some regions, oil emissions, are within limits.
  • Incident reporting: Gränges’ employees can report environmental risk observations in site-specific incident management systems. Risks are managed in accordance with standardized routines and integrated as a part of daily operations. Key risks are raised to the regional management team and mitigation activities are implemented accordingly. Measures to mitigate environmental risks are also integrated in investment and maintenance routines. Gränges takes a precautionary approach to environmental risks.
  • Environmental management certifications: Gränges aims to have all its sites certified in accordance with ISO 14001 (environmental management) and ISO 50001 (energy management) certification standards. The sites in Europe and Asia are certified against both standards. The sites in Americas are preparing for both certifications.
  • Local water management plans: Gränges has set a 2025 target to develop and implement local water management plans in all its sites and has in 2019 agreed on the key elements of such a plan. In short, the plans will include local targets and actions to address water-related impacts.

Risk description and consequence

Health and safety risks mainly relate to incidents or accidents in the cast house or rolling mills, which can cause damage on fingers, hands, feet and legs. Another risk is exposure to chemicals, which can be hazardous to employees’ health. There is also a risk of fire which can lead to explosion or breakdown in a production facility.

Employees and other individuals may be injured if the implementation of safety procedures is unsuccessful or inefficient. Unsafe workplaces can also lead to increased employee turnover as well as higher operating costs and production interruptions, which in turn could result in increased costs for Gränges. Safety and health incidents can also lead to reputational damages for the company.

Risk mitigating activities

  • Daily monitoring and management: Gränges has strict safety routines in place and continuously invests in safety measures to prevent and mitigate workplace accidents and injuries.
  • Incident reporting: Gränges focuses on preventing workplace injuries and ensuring safe behaviour. Job safety analysis is carried out and all incidents and accidents are registered and classified in incident reporting systems. A 5S system has been implemented in all sites to ensure a lean, orderly and safe work environment.
  • Global EHS Policy: Gränges has a group-wide EHS Policy which all employees and contracted workers are required to follow. The policy includes clear principles related to occupational safety and health.
  • Safety certifications: Gränges aims to have all its sites certified in accordance with the OHSAS 18001 or ISO 45001 safety management standards. The site in Asia is certified against OHSAS 18001 and the sites in Americas and Europe are preparing for ISO 45001 certifications.
  • Safety training: Gränges arranges safety training for all employees at least once a year. Targeted safety training is also carried out for specific safety aspects.
  • Best practice sharing: Gränges shares safety experiences and best practice through internal cross assessments, safety meetings and intranet communication. The company also shares information with external companies through industry associations.

Risk description and consequence

Employee risks are mainly related to lack of access to and difficulty to attract and retain qualified and skilled employees, which is critical for Gränges to achieve the company’s strategic and operational objectives. There are also risks relating to not having a diverse workforce as this is a prerequisite for a productive and innovative organization. Gränges operates in a traditional industry in non-central locations, which can lead to recruitment related challenges.

Losing key employees or not attracting skilled employees or a lack of diverse workforce can negatively affect Gränges’ possibilities of conducting and developing its operations, and its ability to develop new products. It can also lead to significant cost implications.

Risk mitigating activities

  • Attractive workplace: Gränges strives to offer good working conditions and interesting career development opportunities to attract, develop and retain qualified employees. The company runs a structured recruitment process to ensure the company hires competent and skilled employees.
  • Leadership development: Gränges conducts regular performance and development discussions to ensure motivated and engaged employees. The company also works actively with training opportunities, talent management and succession planning as well as strengthening the corporate culture and core values.
  • Regional diversity plans: Gränges supports an inclusive work environment which leverages employees’ different perspectives, experiences and ideas. In the recruitment process, all else being equal, individuals from underrepresented groups are given recruitment priority. Gränges regularly trains its employees on the importance of inclusion and having a diversified workplace.
  • Health and wellbeing initiatives: Gränges offers its employees occupational and non-occupational health services. Examples include access to occupational health care, regular health checks and access to medical care at licensed medical providers.

Risk description and consequence

Operating in a global business environment can sometimes be challenging as complex market conditions can lead to situations where employees are uncertain how to act. Risk of corruption and bribery exists in many markets where Gränges conducts business.

Corruption can prevent economic development, distort competition, lead to increased costs and destroy confidence, reputation and brand. For Gränges as a company, corrupt activities can lead to costly penalties and government-ordered compliance costs as a result of corruption allegations. The company may also be prohibited from doing business in certain countries or industries, with certain governments or from participating in public tenders.

Corruption can also lead to increased costs for the individual who is involved in acts of corruption, for example civil and criminal liability. Corrupt activities are punished severely by the court, and individuals who are found guilty of violating the law may become liable to fines and imprisonment.

Risk mitigating activities

  • UN Global Compact membership: Gränges supports international standards on human rights, labour conditions, the environment and anti-corruption, including but not limited to the UN Global Compact and its set of ten principles. Gränges has been a member of UN Global Compact since 2016.
  • Responsible business practices: Gränges is committed to operating in accordance with responsible, ethical and sound business principles, and in compliance with all applicable laws and regulations. The company will always act rapidly, stringently and vigorously upon discovering corruption or other unethical behaviour.
  • Code of Conduct: Gränges has a group-wide Code of Conduct which employees and board members, as well as temporary staff, must follow. The company has a target that all of its employees annually should conduct training in the Code of Conduct.
  • Anti-Corruption Policy: Gränges also has a group-wide Anti-Corruption Policy which all Gränges’ employees and board members must adhere to. These individuals must also take reasonable steps to ensure that Gränges’ independent business partners, including suppliers, customers, and joint-venture partners, do not engage in corruption or other illegal or unethical activities related to their business with Gränges. The company has a target that all of its white-collar employees annually should conduct training in anti-corruption.
  • Whistleblower function: Gränges has a Whistleblower function which is managed by an external company and can be accessed online or via telephone. Through the function, employees and external business partners can

Risk description and consequence

Gränges operates in many different markets, with local laws and rules. Failure to keep abreast of legislative and regulatory requirements may cause financial liabilities or even loss of permits. If employees or individuals who work on Gränges’ behalf violate laws and rules, it could have negative consequences for Gränges.

The company may be affected by events that damage confidence in the company, its operations, or employees, for example if environmental, quality, or ethical requirements are not met in the manner prescribed by Gränges.

Risk mitigating activities

  • Continuous monitoring and management: Gränges continually monitors legislative and regulatory developments through external partners, and through membership in various industrial organizations. The company observes all applicable local and international laws and regulations.
  • Communication and training: Gränges regularly informs its employees of relevant changes that the company must follow. The company also trains relevant employees to ensure good knowledge and understanding of legal risks and requirements.

Risk description and consequence

These risks relate to disturbances in critical IT systems, business processes or other digital infrastructure. Such disruptions can have a direct impact on production and other important business processes and could lead to inability to deliver products or services in time to customers or other stakeholders. This can in turn lead to financial and reputational losses. Errors in the handling of financial systems can affect the company’s financial reporting.

The risk of unauthorized intrusion into Gränges’ systems may result in financial losses and other damage. These risks grow in an increasingly technically complex and interlinked world. Failure to adequately restrict access to information may result in unauthorized knowledge or use of confidential information.

Risk mitigating activities

  • IT security management: Gränges has implemented processes to handle IT security and to mitigate risks related to incidents. These processes are continuously improved according to the latest best practice. The IT environment is proactively monitored and abnormal patterns are acted upon.
  • Regular audits: Gränges conducts yearly audits to identify IT security risks, covering internal and external perspectives. These risks are raised to Group management and mitigation activities are implemented accordingly.
  • Information Security Policy: Gränges has an established Group Information Security Policy which all employees, including contractors and board members, must adhere to.
  • Communication and training: Gränges regularly informs and trains its employees to create information and cyber security awareness and understanding.


Financial risks

Financial risks are managed in accordance with Gränges’ Financial Management Policy. Gränges uses derivatives and other financial instruments to reduce financial risks.

Risk description and consequence

Currency risks are related to the fact that Gränges’ Group sales primarily are generated outside of Sweden. Sales contracts are mainly denoted in USD, EUR and CNY, depending on where the customers are located. Changes in foreign exchange rates have an impact on Gränges’ income statement, balance sheets, and cash flow.

Over time, changes in foreign exchange rates may also affect the company’s long-term competitiveness and earning capacity.

Risk mitigating activities

  • Financial Management Policy: Gränges has a Financial Management Policy which regulates the company’s management of foreign exchange risk.
  • Financial instruments: Gränges uses financial instruments, mostly forwards, to reduce the company’s exposure to changes in foreign exchange rates regarding its commercial cash flows. Changes in exchange rates for firm commitments are managed in accordance with a model whereby the exposure with a duration of up to 18 months is hedged. Exposures relating to customer orders without firm commitments are partly hedged up to 24 months.

Risk description and consequence

volumes of aluminium for the company’s production facilities in Sweden, China and the US. The price of aluminium is based on the trade price on the LME in London or SHFE in Shanghai. Gränges’ revenue model means that the cost of aluminium is passed on to the customer, through agreements with customers and suppliers. There usually is a lag between the aluminium procurement date and the pricing of the finished product, which means that Gränges could be exposed to fluctuations in the price of aluminium. If the metal price risk is not handled, fluctuations in the metal price could lead to losses.

Risk mitigating activities

  • Metal Management Policy: Gränges has a Metal Management Policy which regulates the company’s management of commodity price risk. The goal is to balance the short and long position so that the company is not affected by changes in the price of aluminium.
  • Financial instruments: Gränges uses financial instruments to manage the commodity price risk which can arise if there is a lag between the aluminium procurement date and the sale of the finished product. Gränges takes no positions for speculative purposes.

Risk description and consequence

Gränges’ interest rate risk is mainly related to the Group’s interest- bearing liabilities. The actual interest rate risk depends on the total size of the interest-bearing debt. Changes in interest rates may affect the Group’s results and cash flow and/or the fair value of financial assets and liabilities.

Risk mitigating activities

  • Floating interest rates: Gränges’ borrowings are mainly in SEK and USD at floating interest rates.
  • Duration of the interest-bearing debt portfolio: Gränges can adjust the duration of the interest-bearing debt portfolio by longer interest periods or by interest rate swaps. The target for the duration of the interest-bearing debt portfolio is regulated in the Financial Management Policy. In 2019, no interest rate swaps were used to prolong the duration.

Risk description and consequence

Liquidity risk is related to the ability for Gränges to meet its payment obligations. Cash flow from operations, which is affected by changes in working capital among other factors, is managed at group level. The liquidity risk is affected by for example Gränges’ future commitments, available cash and available credit lines.

Risk mitigating activities

  • Liquidity forecasts: Gränges forecast future payments and obligations for the next twelve months against incoming cash flows and available credit facilities, including a strategic reserve. Excess liquidity is managed by the Group’s treasury function.
  • Financial Management Policy: Gränges has a Financial Management Policy which regulates a minimum level for available liquidity, including committed credit facilities from banks.

Risk description and consequence

Credit risks are related to a counterparty not meeting its financial obligations towards Gränges. A credit risk can be related to for example trade receivables or financial counterparties.

Risk mitigting activities

  • Continuous follow-up: Gränges’ trade receivable exposure is managed and followed up continually in local credit committees. The need for provisions is tested every quarter, or when necessary, according to predefined criteria.
  • Credit ratings and agreements: Gränges manages credit risk on financial counterparties by choosing counterparties with a good credit rating, by limiting the actual exposure per counterparty, and by agreements such as ISDA agreements.