Critical risk management

Nexans’ new strategic move towards electrification is picking up pace in 2021, with a radical change in its market positioning and business model. This process has to be accompanied by a robust and selective analysis of Nexans’ risks and opportunities arising due to the emergence of new threats (cyber attacks, etc.) and unforeseen situations (Covid-19), as well as the need for responsiveness and agility that comes with deep-seated changes.

In view of these factors, Nexans has developed a corporate risk management system so that its operational and support divisions can include risks and opportunities in the various decisions they need to take in managing their business activities.

In 2020, Nexans updated its risk map, which identifies the main risks – i.e. strategic, operational, legal & compliance and financial risks – that could have an impact on its business, financial position, outlook, reputation and results of operations, or on its ability to achieve its objectives (in line with the European “Prospectus 3 Directive”).

For each category, the risks are classified depending on their degree of criticality – weak, moderate, significant or critical – i.e. based on their seriousness and probability of occurrence, after taking into account the mitigation action plans put in place.

In view of the major impacts caused by the unprecedented Covid-19 pandemic, Nexans’ risk management system has been further strengthened. The Group had to adapt its business model in 2020 in order to protect its employees, while taking care to ensure the continuity of its operations so that it could also protect its customers and partners. Consequently, we put in place – and are continuing to implement – health and safety measures, as well as business continuity plans for our manufacturing operations, which enabled almost all of our plants to continue to operate without any interruptions, albeit with variable output volumes depending on the plants and time periods concerned.

NEXANS’ 13 RISKS BY CATEGORY AND DEGREE OF EXPOSURE

NEXANS’ RISK MANAGEMENT ORGANIZATION EFFECTIVE MANAGEMENT OF RISKS AND INTERNAL CONTROL

The success of Nexans’ strategy and operations depends on its ability to manage risks. Consequently, the
Group has set up a dynamic risk management system, which has the dual aim of enabling it to (i) analyze the main risks that could affect its ability to achieve its strategic objectives, and (ii) put in place appropriate measures to ensure that risks are effectively managed and reduced to acceptable levels. This risk management system is structured in the form of internal control processes, based on three lines of defense.

CLIMATE RISK – ASSESSMENT IN PROCESS

Nexans has set up a working group to draw up a quantitative and qualitative scoring system for climate risks (physical risks and transition risks), based on the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD) concerning the effect of climate-related risks on companies’ businesses.
Set up by the G20 at the COP21 Paris Climate Conference in 2015, the TCFD sets out recommendations concerning companies’ climate-related financial disclosures. The TCFD’s final report published in June 2017 specifies the four core elements of climate-related financial disclosures that should be included in corporate registration documents: Governance, Strategy, Risk Management, and Metrics and Targets.