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Ferrovial

Ferrovial - Integrated annual report 2013 / Risk Management

The company operates in numerous countries with varying socioeconomic environments and regulatory frameworks. In general, Ferrovial considers significant any risk that may compromise the viability of its various businesses, its profitability, and its corporate reputation; in particular, any factor that might compromise the integrity of employees or third parties affected by its business activities or that has an impact on the environmental surroundings in which these are undertaken.

Since 2009, Ferrovial has been implementing the new process of integrated risk management, called Ferrovial Risk Management (FRM), led by the company’s Risk Management Department. This process identifies and assesses risks that threaten the achievement of business goals set by Management, whether financial or non-financial.

The whole organization takes part in the FRM process, with its main objectives being:

  • Risk identification and assessment, through a prioritization and standardized evaluation exercise.
  • Adoption of corrective measures needed to mitigate the impact of risks and/or the probability of their occurring.

The process operates at different levels of the organization. Identification, assessment and comprehensive management of risks is carried out bottom-up, starting with managers working directly in the businesses at local level through to higher levels of the company.

The definition of the FRM and its components, the risk universe (strategic, operational, compliance and financial risks) and a uniform rating scale for the entire organization, is based on Ferrovial’s Control and Risk Management policy, which is established by the Board of Directors and organized into a set of principles. FRM does not consider Corporate Responsibility to be a risk, but rather a business goal to be achieved by the organization, which means that the company managers must identify and assess the risks to achieving the Sustainability goals set by Management.

Types of risks

Strategic risks

These are possible risks related to the market and the environment in which each business operates; those that may arise from alliances with partners; and risks associated with the company’s own organization, its governance structures and its relationships with external agents.     

Operational risks

Following the chain of each business, the company analyzes the possible occurrence of risks associated with processes related to sales, collection and customer relations; purchases, payment and relations with suppliers; and the various types of assets and factors of production.

Compliance risks

The system analyzes possible risks associated with compliance with obligations arising from three different areas: applicable legislation, contracts with third parties and obligations selfimposed by Ferrovial companies, basically through their codes of ethics or conduct.

Financial risks 

This area analyzes potential risks associated with changes to financial data and/or access to the financial markets, cash management, the reliability of financial information and tax-related risks.

The exercise of identifying risks is carried out at the same time throughout the organization, taking into account the geographical diversity of Ferrovial’s activities. To carry out this exercise, 109 different business realities have been distinguished for carrying out the risk identification and assessment process, and for designating the managers responsible for carrying out the analysis.

In the FRM process, the organization’s risks are identified and assessed (this takes into account the potential impact on the benchmark objectives, the probability of their occurrence and the exposure of the businesses to this situation). Risk events (called contingencies in the FRM) that may have occurred in the organization are also identified and assessed.

Risk Management and Control policy

A policy on Risk Control and Management was approved in 2011. It is applicable to all those companies in which Ferrovial has a majority holding and/or management control. The policy is based on respect for Ferrovial’s Code of Business Ethics.

The Procedure to identify and assess risks and contingencies was formalized in 2012, with the aim of harmonizing criteria regarding methodology, information, supervisors, etc.

Crisis communication and management procedures

The general system of risk supervision and control is closely linked to crisis and business continuity procedures.

In the corporate sphere, the risk profile is a basis for detecting sudden situations that may affect the company’s reputation. These risks are identified in catalogs that are specific to each business activity. They are permanently updated and accessible at the organization levels where such situations may occur.

The crisis communication model enables Ferrovial to deal effectively with any contingency that may affect the company’s reputation negatively and significantly because of its importance and interest to the media and public opinion. The first steps taken to deal with possible contingencies are key elements for managing a crisis.

That is why an internal and external communication protocol is in place to ensure that in a crisis situation the decision-making organizational levels are provided with reliable and appropriate information in the shortest possible time.

There are also specific procedures in the systems of the business areas that include measures to be implemented at the levels affected by the crisis in order to mitigate damage to people or the environment, and to reduce the economic impact of the crisis and help the business activity recover in the shortest possible time.