Annual and Sustainability Report | 2019

JBS
A global food company

Risk management

GRI 102-11

The Risk Control Department structure is responsible for identifying, assessing, mitigating and monitoring the financial risks inherent to JBS operations.

Based on the guidelines of the Financial Risks and Commodities Management Policy, as approved by the Board of Directors, this area also supports operational units in identifying and monitoring risks specific to their own activities, supported by specialist staff and specific systems.

The matrix below lists the risks JBS has identified by category and severity level, as well as the efforts made to mitigate them.

 

Main financial and socio-environmental risks

Category Types Definition Mitigation method
Financial risks Market Currency, interest rate and commodity price risks
when price fluctuations could affect JBS businesses..
Exposure is mapped in real time.
Hedging instruments, including derivatives, are used, subject to approval from the Board of Directors.
Credit The risk of default on accounts receivable, financial investments and hedge contracts. Accounts receivable: portfolio is diluted and secure credit parameters are set (always based on proportional limits, financial and operational ratios and credit agency queries).
Financial transactions with financial institution counterparties: exposure thresholds are defined by the Risk Management Committee and approved by the Board of Directors, based on international rating agency classifications.
Liquidity The possibility of imbalances appearing between negotiable
assets and enforceable liabilities that could affect the ability
to fulfill future financial obligations.
Capital structure management focuses on immediate, modified liquidity metrics – i.e. cash on hand and financial investments, divided by short-term debt – and working capital, to maintain leverage for the Company and its subsidiaries. In 2019, a Liquidity Management Policy was published, establishing guidelines for the liquidity management process at the Company and its subsidiaries, in Brazil and abroad.
Social and environmental risks Raw material procurement The risk of purchasing raw materials from suppliers involved in deforestation of old growth, invasion of protected areas – such as indigenous land or environmental conservation units – use of child or forced labor or products that could pose a risk to consumer health. Cattle purchases: adopt and notify the market of the social and environmental criteria adopted for purchases and support for the use of best farming practices. In Brazil, supplier farms located in the Legal Amazon States are monitored using a geospatial system capable of identifying non-conformities and barring raw material purchases from non-compliant suppliers. (https://jbs.com.br/en/sustainability/product-integrity/cattle-responsible-purchase/)
Poultry and pork: the Company’s integrated relationship with animal breeders assures the origin and quality of raw materials. Suppliers are visited periodically and are audited to ensure production practices are in line with the criteria established by JBS. (https://jbs.com.br/en/sustainability/product-integrity/relationship-with-poultry-and-pork-suppliers/)
Product quality: a global area dedicated to monitoring all production processes, which are audited internally by various regulators and customers to maintain high food quality and safety standards and remain eligible to serve all markets. (https://jbs.com.br/en/quality/home/)
Climate change Climate change could have a negative impact on the
Company’s businesses. Resources like water, electricity and
animal feed (which is dependent on farming) are critical for
production of raw materials (cattle, poultry, pork and lamb). Businesses could also be affected by new legislation and
regulation in this area.
We monitor the environmental impacts from direct (industrial, logistics and shipping) operations, taking steps to minimize these impacts on the Company’s own and its suppliers’ operations. Monitoring involves taking a global inventory of direct and indirect GHG emissions using the international GHG Protocol methodology. The results of the inventory are published annually on the CDP platform. JBS also monitors indicators representing the volume of water and electricity used by its operations in order to optimize production processes and gradually reduce consumption. To reduce impacts of its operations and create opportunities, the Company has an annual plan to invest in environmental improvements aimed at optimizing use of natural resources, water and waste energy recycling and other issues. Water risks were also mapped for JBS USA operations, with the help of the Aqueduct tool, from the World Resources Institute (WRI). (https://jbs.com.br/en/sustainability/environmental-
management/climate-changes/)

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