Creating Value from Risk Management Peter McGee Belinda has shown us the potential impacts of a food safety crisis on your business. I can only echo her sentiments. First a poll: How many have a recall exposure? How many have plans? How many run tests? How many purchase insurance? Does this still keep you awake at night? But the fact is, if we are in business then we are taking risks. We take risk every day and so why then the negative connotation to the term risk? Following on from Belinda’s presentation my intent is to show you how risk can create value in your business.

CREATING VALUE $$$$ Risk Value Businesses are valued many ways, but when it comes down to it, the value in your business is derived from: A Revenue or profit measure A risk factor The risk factor is ultimately about the certainty of these cash flows We focus on the revenue and profit numbers of our businesses every day, but how much focus do we put to this risk factor?

Risk has Upside and Downside “Risk is the management of uncertainty of objectives” (ISO31000:2009) The definition of risk in the international risk management standard, ISO31000 provides a useful tool in switching or focus from loss avoidance.

ALIGN RISK FRAMEWORK TO STRATEGIC OBJECTIVES What are the risks worth taking? Fundamental Objective Strategy 1 Strategy 2 KPI Which risks will prevent me from getting there?

A word on Reputation: Reputation Consequence

How do we create value? Better Decisions Competitive Advantage Resilience Risk Culture Cost Reduction

How do we create value? Australian food industry’s high food safety standards has: "created disciplines and processes in the business that make us world leading in supply-chain management” Anthony Di Pietro, Premier Fruits Group, AFR, 29/7/13

Result Problem Solution Outcome Better Decisions Major food processing business with: spiraling insurance costs impacting on EBITDA Impacting on valuation for potential exit Problem 4 year Investment in risk improvement: Capital improvement Improved systems Solution Better Decisions Allocation of capital based on risk priority Competitive Advantage Strengthened balance sheet Resilience Customer confidence in product availability Risk Culture Improved performance and reduced insurance claims Cost Reduction Premium savings over five years of more than $4M Outcome Trade sale: Improved EBITDA Better multiples Result

What could they have done differently? Better Decisions Competitive Advantage Resilience Risk Culture Cost Reduction What could they have done differently? The sales team estimated an increase in sales of $3-5M if credit controls cold e loosened. Insurance option presented to Board as $100K investment for $3M in sales. $100K policy deemed expensive

Risk Maturity Naïve Compliant Developing Mature Value Adding

How do you make your investment decisions? Better Decisions Competitive Advantage Resilience Risk Culture Cost Reduction Option 2 Option 1

Thank You Peter McGee Come and see us at Meet the Experts tomorrow Belinda has shown us the potential impacts of a food safety crisis on your business. I can only echo her sentiments. But the fact is, if we are in business then we are taking risks. We take risk every day and so why then the negative connotation to the term risk? Following on from Belinda’s presentation my intent is to show you how risk can create value in your business. Come and see us at Meet the Experts tomorrow