Strategic risk landscape
Achieving the Sandvik strategy is dependent on continuously managing risks associated with it. These risks can be driven by external factors where our ability to influence them is limited and risk mitigation is hence focused on agility and adaptability. They can also be more directly within our own control. Sandvik continues to run its well-established Enterprise Risk Management (ERM) process which is used in all parts of the Group for analyzing risks in the local entity, business unit, division, or business area. These local risk analyses are heavily influenced by the strategy and key objectives for each part of the business, in accordance with our decentralized way of working, but the total outcome is aggregated into a bottom-up summary of the most significant risks at Group level. You can read more about this process in Risk management.
Since 2022, we have complemented the bottom-up process with a strategic analysis at the Group Executive Management level and identify key risk areas that are tied to our ability to execute on our strategy. This is done to achieve a more focused, strategic risk landscape for the Group to enable good follow-up of the various risk mitigating activities in relation to the strategic goals.
The Sandvik Key Risks map for 2024 details the individual risks we are actively addressing to achieve long-term success and strategy fulfillment. When we deliver on our strategic targets, many of the risks will be fully mitigated. The Sandvik Key Risks map is also coupled with a follow-up model for tracking the initiatives that will lead to improved risk mitigation (see Key risks 2023). The tracking model is regularly reviewed and discussed in the Group Executive Management team, thus creating a more dynamic and strategically relevant risk management discussion at the highest level of the company.
Navigating key risks
The illustration shows which strategic area each key risk relates to, although several risks are relevant for more than one strategic area. The proximity to the center shows how actively we operationally work with the risk. The further out from the center, the more long-term/strategic the risk is. Many risks are both short and long-term and require both short and long-term mitigation.
01. Securing key supply
- Supply chain/logistics
- Batteries
- Mineral supply
02. Inventory build up/cash conversion
- Access to cash
- Credit rating downgrade
- M&A agenda realization
03. Acquisition value creation
- Business case delivery
- Ensure efficient administrative integration
04. Being compliant
- An ethical culture
- Increased regulatory complexity
- Stricter financing requirements
05. Changing regulatory requirements
- Trade sanctions
- Product/safety requirements
- Change to data-driven processes
06. Understanding changing customer needs
- Customer centricity
- Timely adjustment to market transformation
- Ensuring customer value
07. Manage downturn
- Meeting target EBITA range
- Timely execution of contingency plans
- Margin volatility
08. Manage inflation
- Price management
- Leverage procurement capabilities
09. Key talent attraction/retention
- New talent (digital, electrification, sustainability)
- Reskill existing workforce
10. Digital disruption
- Cyber security
- Information security
- Disruption by digital players
11. Business transformation
- Electrification of the mine
- Closed loop manufacturing
- Execution of digital shift and data-driven productivity
12. Geopolitical developments
- Regionalization/nationalization
- Trade wars
- Disruptive events (natural disasters, pandemic)