Risk management system

The current macroeconomic situation, financial market volatility, complex management processes and continuous legislative and regulatory evolution force businesses to protect and maximise tangible and intangible sources of value that characterise their own business model. Assessing and preventing risks that might compromise the Group’s values and objectives have always been an integral part of Pirelli’s distinctive spirit of innovation and professional excellence. For these reasons, the Board of Directors decided in 2009 to upgrade its corporate governance system by introducing a pro-active risk management system. It uses a systematic and organised process of identifying, analysing and assessing risk-prone areas that could compromise the attainment of strategic objectives, provides the Board of Directors and top management with decision-making tools so that they can anticipate and manage the effects of these risks and, more in general, “govern” them, guided by the awareness that the assumption of risk is a fundamental part of business management. Strategic objectives are not only economic but also social and environmental, reflecting full integration of the sustainability system in corporate development plans.

In accordance with this philosophy, Pirelli has implemented an integrated risk management system (Enterprise Risk Management) aimed at:

  • managing risks in terms of prevention and mitigation;
  • proactively seizing opportunities;
  • disseminating the “culture” of the value of risk inside the Company, particularly in strategic and operating forecast and planning processes and in the most important choices made by the Company;
  • assure transparent disclosure of the assumed risk profile and implemented management strategies, through periodic and structured reporting to the Board of Directors and top management, and adequate disclosure to shareholders, as well as to all stakeholders in general.

Consistently with these aims, the Pirelli Enterprise Risk Management is characterised by being:

  • enterprise-wide, i.e. extended to all potentially significant types of risk/opportunities;
  • value-driven, focused on the most significant risks/opportunities according to their capacity to prejudice achievement of Pirelli strategic objectives or impair critical corporate assets (“Key Value Drivers”);
  • top-down, insofar as top management establishes the guidelines for identifying the priority risk areas and events having the greatest impact on business;
  • quantitative, insofar as it is based, wherever possible, on exact measurement of the impact of risks on expected financial results according to the likelihood of their occurring;
  • integrated in decision-making and business processes and, in particular, in the strategic and operating planning process.

PIRELLI risk management approach

PIRELLI risk management approach

For more details on the Pirelli Risk Management System, please also refer to the “Annual Report on Governance and Share Ownership” – Volume B of the Annual Financial Report at December 31, 2011.