Risk Management

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Enhancing Performance through Business Continuity Planning Vivartia's treasury has managed its contingency planning during uncertain times, including a potential Greek default and secession from the Euro.

Enhancing Performance through Business Continuity Planning

Vivartia main image

by Marianna Polykrati, Group Treasurer, Vivartia

With the majority of its revenues derived from sales in the Greek market, and most of its 11,000-strong workforce based in Greece, the Eurozone crisis and potential for Greece’s exit from the euro has been a discomfiting time for Greek food company Vivartia. Consequently, the company has had to make specific plans on how to manage a possible Greek exit, and the potential impact on financing, revenues and growth. Although the risk is now less severe than the period of ‘red alert’ in May/ June 2012, Vivartia remains vigilant and conscientious in its contingency plans.

Planning for uncertainty

At Vivartia, we have recognised for some time that effective risk management and contingency planning against a wide range of risks was critical to our business, particularly in the face of political and economic instability. The prospect of Greek government loan default and secession from the euro first hit the headlines in November 2011 and acted as a trigger to assess the group’s ability to deal with major market shocks. As part of this process, we identified some important areas in which our contingency plans were lacking, so treasury was tasked to develop a robust risk management and contingency plan, termed the ‘Business Continuation Project’.

Having obtained this mandate from senior management, we put together a task force in February 2012 to consider various crisis scenarios (including a potential Greek default and euro secession, or indeed any other event that could trigger a major economic and market impact) evaluate the risk factors and propose possible solutions.

Within two months, we had a crisis framework in place. A ‘red team’ comprising the CEO, CFO and representatives from HR, Legal, Treasury, Production, IT, Procurement and Logistics formed a senior management group that in the event of a crisis, would have access to specific control rooms that would act as group headquarters and take all managerial decisions. Regular meetings were scheduled across this team to assess and categorise emerging risks in terms of Vivartia’s degree of preparedness, and agree contingency plans.

By May 2012, the prospect of Greek default and euro secession was at its highest. Politicians, economists, bank leaders and commentators were increasingly contemplating a euro without Greece as a member, exacerbated by the inconclusive result during the first round of Greek elections. A range of outcomes were contemplated, including redenomination into a new currency, New Greek Drachma (NGD), exit from the euro without default, and the parallel use of two currencies. While planning for an unknown and unprecedented event inevitably results in speculation, what was clear was that any possible outcome would have extreme ramifications.

We initially approached the topic to discuss security of infrastructure, but this process triggered a variety of additional discussion topics, such as working capital and supply chain management. For example, credit insurers have imposed lower limits on companies exporting to Greece, so we have had to identify alternative sources of supply in some cases.

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