Risk Management

GRI 1.2

With the purpose of preventing losses of various natures, Odebrecht Agroindustrial regularly analyzes and maps its operations and processes in order to identify and manage potential risks.

Market Risk

Risk management actions are guided by the Risk Management Policy, which was approved by the Board of Directors and in incumbent on the Market Risk Management Committee. It comprises the characteristics of management activities, which include the methodologies used for calculating exposure risk, monitoring control reports and systems, in addition to risk taking criteria, limits and financial instruments.

The most immediate risks managed by Odebrecht Agroindustrial are variations in exchange rate, in prices of sugar and ethanol, and in interest rates. Hedge transactions are also considered.

Risk management is intended for the financial and economic protection of cash flow. To this end, derivative instruments are used to hedge against major commercial and financial risk exposures arising from operations. The use of derivative financial instruments is subject to competitive quotations, pricing assessment, accounting impact, and other monitoring techniques. These instruments include stock options, futures, swaps and NDF’s.

The Company reviews its derivative contracts on a daily basis, adjusting its strategy according to market conditions and may use derivatives to influence return from operations. These instruments are contracted at an amount that does not exceed the investment or the underlying commitment.

Environmental and safety risks

Odebrecht Agroindustrial analyzes the industrial processes at all operating units for environmental risks, and uses the Hazard and Operability (Hazop) study to plan for expansion projects involving future facilities and new tanks. The analysis addresses operational matters, as well as possible environmental disasters, fires, explosions in mills and tanks, leakage, and other environmental and health impacts, and enables the adoption of preventive measures. Using the Hazop study is a new industry practice, raising the company the position of an agent of change, and thus contributing and creating a culture focused on precaution. Agricultural fires are permanently monitored. In the 2012-2013 crop year, the company redoubled its attention to this issue, both regarding prevention, as well as controlling and fighting fire outbreaks. Odebrecht Agroindustrial invested in the preparation and distribution of automated fire extinguishment kits; in systems to be installed in its harvesters; and in the preparation of practices and procedures, having adopted all actions required to operate a fully safe agricultural front. Management is based on 64 documented minimum practices.

Operating Risks

In order to ensure safety and business continuity, Odebrecht Agroindustrial takes insurance coverage for its operational and freight assets, as well as environmental incidents. Preventive measures are also used to hinder accidents of any nature, and include internal audits for verification of health, safety and environmental items; and shared communication training and procedures that comprise “near misses”, as well as “accidents.”

Image Management

In 2012, Odebrecht Agroindustrial started to map its image risks. Due to the change in the Company’s name to incorporate the Odebrecht brand, such risks increased in view of the brand’s strength and recognition on the domestic and foreign markets. Structured in the 2011-2012 crop year, the Crisis Management Plan was implemented in the 2012-2013 crop year, together with development of the risk matrix. From then on, the Company started to map and manage all potential risks to which it is exposed, adopting a proactive approach and anticipating events. Risks were identified by units and classified as “low”, “moderate” and “high”. Further detailing will be available as from the next crop year.

 

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