Risk management 2020 ALL THE WAY - Maersk
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ALL THE WAY Risk management 2020 A.P. Møller - Mærsk A/S Esplanaden 50, DK-1098 Copenhagen K / Registration no. 22756214
2 A.P. Moller - Maersk Annual Report 2020 Risk management
Risk management
A.P. Moller - Maersk is accelerating its transforma- transformation at its current stage are largely
tion to become the global integrator of container execution risks relating to, e.g., customer service
logistics. The transformation success hinges on the levels, technology roadmap, market risks for
ability to perform and transform at the same time the Ocean segment, growth capabilities for the
through deployment of critical change levers such Logistics & Services segment, and people capa-
Risk management at A.P. Moller - Maersk is strategically focused as technology, processes and people. It is essential bilities. These risks require active management
and designed to contribute to the achievement of the company’s that risks inherent to the business activities and and monitoring as described in the 2021 Key risk
business objectives in the medium-term and to ensure the risks associated with the transformation are man- analysis described below.
aged well to keep the potential financial and reputa-
longevity of the company in the long-term.
tional impact of such risks within acceptable levels. A.P. Moller - Maersk is exposed to a variety of risks
in the conduct of its business and execution of its
With a defined roadmap in place for the trans- strategy. A.P. Moller - Maersk has a well-established
formation, the risks associated with the Enterprise Risk Management (ERM) process to
Risk identification
Risks are continuously
identified and reported
using uniform templates The Coronavirus (COVID-19)
and tools
The COVID-19 pandemic continues to impact the Proactive risk management, deployment of effective
global economy and the world’s supply chains. The crisis and business continuity management, and a
global demand growth for containers contracted by strong resolve from employees ensure that so far, the
around 2% in 2020, albeit with large fluctuations in operational impact of COVID-19 has been minimised.
Risk monitoring Risk assessment
A.P. Moller - Maersk
demand during the year. Overall, A.P. Moller - Maersk
Development of key risks Identified risks are
was able to manage the impact on demand through One of the biggest COVID-19 challenges for
and mitigation actions are analysed and assessed
risk management
tight cost and agile capacity deployment. A.P. Moller - Maersk has been performance of crew
monitored by risk deep- to determine triggers,
changes for the vessels, mainly due to prevailing restric-
dives and reporting impact and likelihood
process
After the initial steep disruption of demand in the tions. A.P. Moller - Maersk proactively addressed this
first quarter, a strong and unexpected recovery in serious issue through collaboration with governments,
the demand for containerised goods during a period airlines, airport operators, hotels, and port authorities,
where services remained curtailed, implied an extreme and use of special A.P. Moller - Maersk charter flights.
challenge to cope with in terms of cost and capacity
management. The pandemic continues to impact the transportation
and logistics industry operationally and financially.
Risk mitigation Risk recording As A.P. Moller - Maersk manages its way through It is difficult to predict the business impact in 2021,
Risk mitigation action plans are Key risks are established, the pandemic, three objectives continue to guide which will depend wholly on the duration of the pan-
prepared and implemented prioritised and documented, its decisions: protecting its employees, serving its demic and the resulting lockdowns of countries and
across the affected businesses and risk owners are appointed customers by keeping its global network and ports economies globally, as well as on the associated
operating, and helping societies fight the virus. changes in demand patterns.3 A.P. Moller - Maersk Annual Report 2020 Risk management
identify, assess and respond to key risks that can
threaten A.P. Moller - Maersk’s ability to achieve
2021 Key risk analysis
its business objectives. The process is integrated
into strategy review, business planning and per The key risks to achieving the A.P. Moller - Maersk 2021-2025 business plan,
formance management. the assessment of each risk, and the mitigation strategies deployed are described
in the following.
Each year, risks are identified and assessed follow-
ing a comprehensive process covering the enter-
prise and the individual brands. The enterprise High
risks identified are validated for relevance and sig-
December 2020 position
nificance by senior business leaders. Finally, the December 2020 – new risk
Executive Leadership Team reviews the risks and
decides the key risks to the strategy and the busi-
ness plan. Risk description
1 Customer service level
The Executive Leadership Team appoints a risk 2 Technology roadmap
owner for each key risk to oversee the manage- 3 Cyber-attack
25%
2
ment of the risk, including the preparation and 4 Ocean industry collapse
6 3 1 5 People safety and security
execution of mitigation action plans. Once the
Likelihood
4 6 Mergers & Acquisitions
plans for the management of the risks are final-
7 Decarbonisation
ised, the progress and effect of such plans are 8 7
8 Organisational capabilities
monitored by the Executive Leadership Team and
9 Compliance
the Audit Committee in designated and regular
10 Company culture and
sessions. Where the progress of mitigating actions 10 9 5 engagement
is falling behind schedule, or where mitigating
actions are not achieving the effect they were
designed to have, corrective actions are taken.
The ERM process for 2021 was carried out in the
second half of 2020. It identified ten key risks that
Low Financial or reputational impact High
may have a significant impact on the business
plan, including on earnings, financial position and
All positions are residual risk after current mitigation.
achievement of other strategic objectives.
During 2020, A.P. Moller - Maersk has worked sys- and the APM Terminals transformation are not per-
tematically on mitigating key risks shown in the ceived to be among key risks into 2021. Also, the
Annual Report 2019 to further reduce residual risk relating to standardisation of core processes is
risk levels. Among other things, the risk reduc- now included in the technology roadmap risk. Resid-
tions achieved in 2020 imply that risks relating to ual risk levels of continuing risks and new risks by
IMO 2020 low sulphur fuel, cost excellence in Ocean, December 2020 are depicted on the heatmap above.4 A.P. Moller - Maersk Annual Report 2020 Risk management
1 Customer 2 Technology 3 Cyber-attack 4 Ocean industry 5 People safety
service level roadmap collapse and security
Risk description A.P. Moller - Maersk’s strategy to A.P. Moller - Maersk’s growth strategy As A.P. Moller - Maersk becomes Although there have been signs of The business of A.P. Moller - Maersk
become a global integrator of con- is dependent on its ability to trans- increasingly digitalised, more devices structural improvements in the Ocean requires many of the employees and
tainer logistics hinges on the ability to form its digital foundation. If there and control systems are connected segment, there is still a non-negligible other external contractors to work in
deliver a superior service level to cus- is serious delay or failure to modern- online resulting in a wider technology risk that the Ocean industry could high-risk locations both in terms of
tomers. A.P. Moller - Maersk needs to ise technology, execute the Technology surface across the Information Tech again become financially challenged frontline operations as well as in terms
deliver operationally on the service roadmap, and standardise core busi- nology and Operational Technology in another downturn cycle. of working in geographical areas with
level promised to customers in order ness processes, there is a risk that infrastructure, which could be compro- elevated risk.
to build long-term trust and brand Maersk is unable to orchestrate value mised. Should a successful cyberattack
reliability. and stable revenue streams via its materialise, operational disruption and/
technology platforms. or data breaches may occur.
2021 Risk assessment The delivery promise introduced as A.P. Moller - Maersk has made pro- Following the cyberattack in 2017 sev- Another downturn of the Ocean indus- A.P. Moller - Maersk has over the years
part of the integrator strategy is key gress on its technology roadmap eral measures to improve cyber security try over the coming years could become continued to have accidents, some of
to building customer trust and thereby and standardisation of its core busi- have been implemented. However, as a distraction to A.P. Moller - Maersk’s which have unfortunately had very
retaining strong brand reputation of ness processes. However, since the external threat continues to develop, strategy execution and hamper its serious and even fatal outcomes. This
A.P. Moller - Maersk. Not being able to A.P. Moller - Maersk is expanding a cyberattack could still occur leading ability to invest. If the risk materialises, not only causes business disruption
deliver operationally can weaken the into new business areas, the busi- to financial losses, loss of customer A.P. Moller - Maersk may be forced to and affects A.P. Moller - Maersk’s name
foundation of the A.P. Moller - Maersk ness processes and workflows are confidence, reputational damage, focus on improving its short-term and reputation, but more importantly
global integrator strategy. complex, and the current IT land- regulatory sanctions for data breaches, financial performance. brings into focus the duty of care
scape is fragmented, it is likely that and/or operational accidents. towards people.
A.P. Moller - Maersk will see some
delays, as it progresses the road map.
Mitigation strategies A.P. Moller - Maersk is permanently A.P. Moller - Maersk has prioritised Current mitigation includes a cyber A.P. Moller - Maersk has limited levers A new Safety & Resilience function
improving its business processes and technology modernisation, stand- security programme, business continuity to impact the overall demand for has been established to combine
systems to deliver on the new delivery ardisation of core business processes plans, and cyber-risk insurance. The container shipping. However, multiple knowledge and expertise in this area,
promises. In addition, the service levels and development of data as a differ- initial three-year cyber security program mitigation strategies exist, such as have a unified strategy around the
are continuously monitored for swift entiating asset. To achieve the right was completed in 2020. The next phase closely monitoring supply and demand, topic, embed the strategy through
actions to mitigate adverse develop- customer and business outcomes, to further mitigate the threat associated de-commoditising products and ser- a leader-led approach across the
ments, and business continuity strat- A.P. Moller - Maersk is transforming with the enhanced digital interface with vices, focus on cost leadership, and organisation and through manage-
egies are designed and rolled out to the engagement model between Tech customers is already underway. growing Logistics & Services to reduce ment of critical risks.
withstand operational disruptions. nology and business platform owners the exposure to Ocean volatility.
to drive greater cross functional col-
laboration and accountability.5 A.P. Moller - Maersk Annual Report 2020 Risk management
6 Mergers & 7 Decarbonisation 8 Organisational 9 Compliance 10 Company culture
Acquisitions capabilities and engagement
Risk description A key driver to long-term Logistics Decarbonisation is becoming a business Delivering a digitally trans- It is imperative for A.P. Moller - Maersk The A.P. Moller - Maersk culture is
& Services growth is the expansion necessity and a license to operate. It is formed business model as part of to conduct its business in compli- strong with many elements that must
of product and people capabilities critical for A.P. Moller - Maersk to decar- A.P. Moller - Maersk’s global integrator ance with legislation and regulatory be retained. These strong cultural ele-
through successful Mergers & Acquisi- bonise the end-to-end supply chain at a strategy requires right balance of standards. The regulatory landscape ments were critical in getting through
tions (M&A). Acquiring new capabilities speed that meets customers’ and inves- capabilities and skills at all levels in is becoming increasingly complex, and the cyberattack in 2017 and most
is a prerequisite to serve customers end- tors’ expectations. Primary focus is the the organisation. A.P. Moller - Maersk could be hit by a recently in the COVID-19 pandemic, but
to-end, and A.P. Moller - Maersk will decarbonisation of own emissions. major compliance case in respect of there is a need to change and adapt
need to make acquisitions in the com- violations of anti-corruption laws, anti- parts of this culture and to further
ing years. trust regulations, and/or international enhance employee engagement to sup-
sanctions. port the transformed business model.
2021 Risk assessment Some of the acquisitions may be sub- A.P. Moller - Maersk has made a com- A.P. Moller - Maersk made good pro- In respect of corruption, Most notably, customer centricity is
stantial, and if A.P. Moller - Maersk fails mitment of carbon neutrality by 2050. gress in acquiring new and diverse A.P. Moller - Maersk operates in high- a cultural attribute, which must be
to integrate one or more of these, it will With increasing demand from custom- capabilities and skills, especially for risk geographies and high-risk sectors honed to a different level than today.
create a risk to successfully execut- ers and investors, A.P. Moller - Maersk Logistics & Services and Technology. (e.g. the terminals and logistics ser- Another element that must be further
ing the A.P. Moller - Maersk integrator needs to further innovate sustainable Still, the strategy execution could vices sectors). A.P. Moller - Maersk is cultivated is the ability to work across
strategy. supply chain solutions and accelerate be hampered if the right balance of the largest container carrier and in an functions with shared ownership and
its decarbonisation initiatives. capabilities and skills are not main- industry with many industry coopera- accountability for outcomes.
tained at all levels of the organisation. tion agreements. A.P. Moller - Maersk
thereby naturally has the attention of
competition authorities globally.
Mitigation strategies A post-merger integration office has In 2020, a strategic review of climate A.P. Moller - Maersk Capability Frame- A.P. Moller - Maersk has a robust com- Actions were launched to assess and
been established to develop and man- scenarios and transition pathways was work was established to define key pliance programme for anti-corruption, address employee engagement levels
age integration processes and embed conducted with the conclusion that organisational capabilities to support competition law and economic sanc- on a more frequent basis. Further ini-
learnings. Integration capabilities have climate action is a strategic imperative strategic goals. Further actions are in tions, and export controls designed to tiatives will be launched to further
been upskilled through external sourc- for A.P. Moller - Maersk. Consequently, progress to build/buy competencies fulfil the global requirements and many strengthen the A.P. Moller - Maersk
ing. Further actions are planned to a new Decarbonisation function has through functional and leadership pro- initiatives are in place to improve focus behaviours and elevate the company
develop seamless transition between been launched in 2021 to further grammes and targeted recruitment and emphasis on compliance awareness culture.
acquisition and integration activities, embed and accelerate the decarbon- campaigns. and training.
with clear accountabilities and busi- isation agenda, including coordinat-
ness ownership. ing the efforts to reduce the climate
impact of operations and developing
relevant customer offerings.You can also read
