Strategic risk landscape
Achieving the Sandvik strategy is dependent on continuously managing the risks associated with it. These risks can be driven by external factors where our ability to influence them is limited and risk mitigation is therefore focused on agility and adaptability. Others can 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 on Risk management. The bottom-up process is complemented with a strategic analysis by the Group Executive Management to 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 Group strategic goals. The Sandvik Key Risks map 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 2024). 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. Geographical agility
- Lower growth projections in key markets
- Heavy European footprint
02. Geopolitical developments
- Regionalization/nationalization
- Increasing trade tariffs
- Extreme weather events/climate change
03. Business transformation
- Electrification of the mine
- Closed loop manufacturing
- Execution of digital shift and data-driven productivity
04. Digital disruption
- Cyber security
- Information security
- Disruption by digital players
- Embracing AI
05. Key talent attraction/retention
- New talent (digital, electrification, sustainability)
- Reskill existing workforce
06. Manage downturn
- Meeting target EBITA range
- Contingency fatigue
07. Acquisition value creation
- Business case delivery
- Ensure efficient administrative integration
08. Inventory build-up/cash conversion
- Access to cash
- M&A agenda realization
09. Compliance/regulatory requirements
- Increased regulatory requirements
- Third-party risks
- Stricter financing requirements
- Trade sanctions
10. Understanding changing customer needs/requirements
- Customer centricity
- Adapting to market transformation
- Customer requirements on digital compliance
11. Change management
- Operating structure
- Transformative leadership capabilities