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Risk management is an integrated part of doing business at Chr. Hansen. Risks relate to future events or developments that can have an influence on the Company achieving its targets.

Relevant risks are identified, monitored and reported to the Executive Board and the Board of Directors through an Enterprise Risk Management process, which follows an annual schedule. Furthermore, identified risks are presented to and discussed by Management several times during the year. The purpose of this process is to ensure focus on current risks and to identify risks as early as possible, enabling Management to take a proactive approach to adapting business processes and controls to meet, manage or mitigate these risks, or to prevent any increase in the current level of exposure.

Identified risks are evaluated based on their possible impact on several criteria, including safety, business, reputational and financial impact, and the likelihood of the risk materializing. Clear roles and responsibilities are assigned in relation to major risks, and mitigation initiatives are identified, prioritized and launched. The most significant risks identified and reported to the Board of Directors are described below, including measures taken to mitigate these where necessary.

To further ensure a high-quality and consistent approach in the risk management process, the key risks have been divided into five categories where the mitigating activities are of a similar nature. These categories are:

  • Products
  • Technology
  • Customers & consumers
  • Partners
  • Markets

There is a strong focus on the Enterprise Risk Management process within the Executive Board and the Board of Directors to ensure that risk management is an integrated element of decision-making processes. The program is under continuous development, with Chr. Hansen continuing to improve the work on identifying and evaluating relevant risks. The list below does not include all the risks that could ultimately affect the Company.



In order to continue delivering high-quality products while growing the business, Chr. Hansen is focused on improving process standards for all aspects relating to the manufacture of its products. This includes long-term planning of the production footprint to minimize the risks of a consolidated production setup, strong focus on quality and purity to meet the highest food safety standards, and ensuring a safe working environment.

Production footprint

Chr. Hansen has five main production sites: two in Denmark and one each in France, Germany and the US. These sites represent the core of Chr. Hansen’s business, and each site carefully monitors product safety and delivery performance to manage all potential risks. This consolidation of production allows capacity to be optimized to reduce production costs. To minimize the risk of production breakdowns or failures, Chr. Hansen has implemented a risk prevention program of regular audits, which ensures preventive maintenance and replacements.

As production processes are optimized and automated, dependence on robust IT systems and infrastructure increases. Chr. Hansen continues to reduce complexity in IT systems and conduct regular restore tests, as well as improving contingency plans.

This concentrated production setup entails the risk of a production breakdown interrupting the Company’s operations and leading to loss of income in both the short and long term due to long lead times for the replacement of key equipment. The causes might be contamination of production equipment, key equipment breakdown, fire, terrorism or natural disasters.

The risk and impact of a production breakdown are mitigated through maintenance, fire safety measures, behavior-based training, continuous improvements to operational processes, insurance and business continuity plans, including alternative production possibilities.

Developments in 2016/17

Chr. Hansen successfully expanded capacity at the Copenhagen facility during 2016/17, and completed the expansion shortly after the end of the financial year. Both fermentation and downstream capacity have been installed alongside existing production equipment operating at near-full capacity utilization. The risk inherent in expanding alongside ongoing production has been closely monitored. Appropriate mitigating actions have been put in place to enhance the standards of the risk mitigation setup.

Besides expanding production capacity, Chr. Hansen has also separated fermentation and downstream into two lines that now work independently. This mitigates the effect of equipment breakdown and allows for maintenance on one line while continuing production on the other.

Additional freezer capacity has been built to cater for the increased production in Copenhagen, further improving energy efficiency.

During the year, work started to strengthen our business recovery plans. One objective is to develop stronger links and understanding between sites to allow better and faster continuity of production if a production site is adversely impacted.

Significant volume growth in human health in recent years means that utilization of the existing facilities has reached a very high level. Installation of a new fermentation line will be completed in 2017/18.

During 2016/17, the amount of recycled waste increased significantly by 6 percentage points on last year, mainly due to product scrap being used for biogas (29% of total waste is recycled, and the 2020 target is 40%). Energy efficiency decreased slightly by 3 percentage points this year due to the installation of new equipment, which required a three-week production shutdown. Water efficiency decreased by 11 percentage points, mainly due to high water consumption at a Natural Colors sites. This will be a focus area for next year.

Completion of the capacity expansion means that close to 60% of the fermentation capacity for dairy cultures is now located at the Copenhagen site. However, separation of the production lines has reduced the risk of a total production breakdown at this site. Overall, the production risk is considered to have decreased slightly compared to last year.

Product safety

The majority of Chr. Hansen's products are sold to the food & beverage, human health, animal health and plant health industries. Most products are components in customers’ end products that are consumed as food, beverages or dietary supplements.

To ensure the highest product safety, Chr. Hansen has an extensive quality assurance and food safety program covering the entire value chain, from the sourcing of raw materials until the finished products are delivered to customers. The risk assessment performed as part of the food safety program includes an evaluation of the use of our products in customers’ end products. Chr. Hansen’s food safety program is certified according to internationally recognized food safety standards. All production sites are FSSC 22000 certified, and central product development functions are certified according to ISO 22000.

Developments in 2016/17

There were two product retrievals in 2016/17, compared to three in 2015/16. In both cases, the retrievals were carried out as a precautionary measure following identification of a potential risk and not as a result of an actual confirmed safety risk related to the product.

All inspections by authorities during the year have been concluded satisfactorily. The risk related to product safety is considered unchanged.

Health, safety and security

Chr. Hansen is committed to continuously improving both the physical and psychosocial working environment for its employees. The Company has implemented several initiatives to underline the importance of a safe working environment. Monitoring and follow-up of incidents take place at both departmental and Executive Board level. All major sites have implemented measures to increase awareness of safe behavior and site security.

In light of the increasing number of cybercrime incidents, focus on IT security has been further sharpened.

Developments in 2016/17

The creation of a global Health and Safety Organization has sharpened focus on establishing a zero-accident mindset across the organization, so all employees can work safely, with clear instructions on how to minimize accidents at work. This has resulted in the best-ever performance within health and safety. The Lost-Time Incident Frequency (LTIF) decreased from 4.0 last year to 2.5 in 2016/17, an improvement of almost 38% on last year that keeps Chr. Hansen on track to achieve the target of ≤2.0 in 2020. The strong focus on health and safety is also reflected in the reduced incident severity, which was down from an average of 10 to five days, equivalent to a 50% improvement on last year.

The main reasons for the positive results are a combination of a high level of Management attention, global safety assessments, global minimum requirements and the launch of new behavior-based safety tools.

The risk of health, safety and security incidents is considered unchanged, as the risk related to health and safety has decreased, while the risk related to cybercrime has increased.



The increased technical complexity of new solutions demands a growing number of highly skilled employees, not only in research & development but also in sales & marketing, to ensure that continued innovation is introduced in both existing and new markets. To continue to deliver relevant innovation to customers and navigate the complex patent landscape, it is paramount that Chr. Hansen continues to attract the best resources.

Human capital

Attracting and retaining the best employees and new talents remains crucial if Chr. Hansen is to continue to excel. Human knowledge is critical to Chr. Hansen’s business, and there is a strong focus on continuously building and expanding the knowledge base by actively developing employees’ key skills.

The Company employs a large number of scientists and other experts in their fields. Developing their skills and knowledge is an important part of building competencies globally. Equally essential, however, are integrating these highly qualified employees into the day-to-day business and helping them become better at converting their expertise into business value. A number of tools are being utilized to retain key personnel, including appropriate incentive systems, education and succession planning.

Developments in 2016/17

The average number of training days per employee was 2.8 in 2016/17 (3.4 in 2015/16). Employee turnover was 12%, compared to 10% in 2015/16, which is considered an acceptable level. During 2016/17, the average number of fulltime employees increased by 232. The risk related to attracting and retaining the best employees and new talents is considered unchanged.

Chr. Hansen has also conducted the second annual employee engagement survey. Employee engagement is a measure of the employees’ desire to perform, be productive and have an emotional connection to their workplace. These are strong drivers of overall business performance. The overall score improved, and the improvement was twice as high as the average improvement for companies running the survey for the second time.

Intellectual property rights

A strong and protected technology platform is important for Chr. Hansen. Focus on protecting intellectual property is increasing as the technical complexity increases in the industries in which Chr. Hansen operates. The Company has a proactive patent strategy and protects new knowledge created to support and protect its business. Chr. Hansen has more than 2,000 patents granted or pending.

Developments in 2016/17

Chr. Hansen filed 27 new patent applications in 2016/17, compared to 37 in 2015/16. New applications were filed in all business areas. Thanks to these filings, the risk related to intellectual property rights is considered unchanged.

Customer & consumers


Chr. Hansen is highly dependent on delivering relevant and value-creating solutions to its customers and to the end consumers. The Company relies on close relationships with customers and a strong understanding of consumers and regional taste preferences. To ensure this, direct sales representation is established in all major markets.

The strong focus on customer intimacy often leads to longterm and strategic relationships that yield increased visibility. In general, Chr. Hansen becomes less dependent on individual customers as local and regional players take share from larger players. However, certain individual customers grow in importance, and if the Company fails to deliver on e.g. innovation or quality, the potential downside of losing strategic customers increases. Chr. Hansen monitors its customer dependency across business areas to understand potential vulnerabilities and to initiate mitigating activities.

Developments in 2016/17

A structured approach to measuring dependency and vulnerability with regard to key customers has been put in place, confirming strong relationships with key customers but also emphasizing areas where improvements can be made.

Chr. Hansen continues to see unchanged growth opportunities within dairy, confirmed by our bottom-up analysis of the industrialized market space.

The risk related to customers and consumers is considered unchanged.



In some parts of its business, Chr. Hansen depends on partners to handle key areas where the Company does not possess the required key competencies. To ensure that such partners live up to the standards of Chr. Hansen, diligent evaluation of fit is performed when engaging with new partners.

Existing partnerships are also monitored to ensure a continued high standard. Chr. Hansen has various kinds of partnerships, including large farmers producing raw materials for natural colors, production and packaging partners, universities and biotech companies in the human microbiome area, and FMC Corporation in plant health.

Developments in 2016/17

During 2016/17, Chr. Hansen further developed relationships with existing partners in the human microbiome area and conducted dialogues with other potential partners.

Chr. Hansen and FMC Corporation continued the cooperation within plant health product development and commercialization.



Competing globally and having an increasing share of revenue in emerging markets can add uncertainty and obstacles in certain markets, which can impact both revenue and profitability. Examples are changes in the competitive landscape, limited or no access to markets due to sanctions, fluctuations in currencies and raw material prices, and regulatory changes. Close surveillance of the markets in which the Company operates is important in order to take any necessary mitigating actions in good time.

Business environment

With offices in more than 30 countries and sales to more than 140 countries, Chr. Hansen is from time to time affected by geopolitical uncertainties and unrest.

As a supplier of ingredients mainly to the food industry, Chr. Hansen is rarely directly affected by trade restrictions. Customers of Chr. Hansen are more likely to be affected by trade restrictions, which could potentially have an adverse effect on the Company’s sales. In those instances where the Company’s products are or will be affected by sanctions, Chr. Hansen acts in full compliance with these.

Political and economic unrest in countries and regions where Chr. Hansen operates or plans to operate is monitored continuously and taken into account when making strategic decisions.

Developments in 2016/17

An improving economic environment has led to stable market conditions in most business areas and markets. However, political instability in some regions has slightly increased the uncertainty related to the future business environment.


Chr. Hansen has some of the most extensively documented probiotic strains on the market and works continuously to improve the documentation of health claims related to these probiotic strains and to respond to changing documentation requirements from authorities.

The Company’s approach to the underlying studies is in line with EFSA’s guidelines on the subject, meaning that the effect is evaluated on the basis of quantifiable responses in biomarkers in scientifically valid tests.

Developments in 2016/17

Chr. Hansen continues to work on better clinical data to support the health claims of existing and new strains in specific settings.

In November 2016, Chr. Hansen completed the acquisition of the rights to LGG®, the world’s most extensively documented probiotic strain, which was previously produced under a license agreement. Complete control of LGG® has further strengthened the Company’s leading position within documented probiotic strains. The risk related to documentation is therefore considered to have decreased.

Direct and indirect taxes and transfer pricing

Chr. Hansen is a global business operating in multiple jurisdictions with different tax rules and regulations. It is the Company’s intention always to fulfill the tax requirements in all the countries where business is conducted. Chr. Hansen works constantly to create tax awareness in the organization, and has defined clear roles and responsibilities between line management, local finance and the Group Tax function. However, tax and transfer pricing disputes do arise from time to time as cross-border transactions receive increasing attention from local tax authorities.

Chr. Hansen’s Group Tax function ensures compliance with the Group’s tax position. Enquiries from local tax authorities are addressed in cooperation with tax advisors, and a positive dialogue with local tax authorities is pursued to prevent disputes. The Group Tax function constantly strives to support business activities worldwide in the best possible way.

As a global business, Chr. Hansen is affected by tax legislation in many countries. Changes to tax legislation in one country may have a positive or negative impact on the Group’s tax cost. For example, in 2016/17 a possible new corporate tax regulation was debated in the US that could potentially have had a significant impact on the Company’s tax cost if introduced.

Developments in 2016/17

In order to minimize transfer pricing disputes regarding transactions with the US, Chr. Hansen has obtained an advance pricing agreement with the US and Danish tax authorities. The authorities concluded the agreement in Q3 2016/17, covering all years through 2019/20. Chr. Hansen does not currently pursue advance pricing agreements with other countries, but regularly evaluates the need for such agreements.

In 2015/16, Chr. Hansen received a negative ruling in the US regarding the classification of some probiotic powder products used in human health products. The ruling led to a tariff reclassification of certain human health and natural color products. The dialogue with the US customs authorities on this matter continued in 2016/17, resulting in a payment of USD 5.8 million being made to cover all unpaid tariffs for previous years. The risk related to direct and indirect taxes and transfer pricing is considered to have decreased.

Legal risk

From time to time, Chr. Hansen is party to legal proceedings arising in the ordinary course of its business. The Legal department is focused on analyzing possible risks in a timely manner and mitigating them in an appropriate way using both internal and, if needed, external capabilities. Despite the focus from Chr. Hansen on these matters, the outcome of legal proceedings cannot be predicted with certainty.

Developments in 2016/17

During 2016/17, Chr. Hansen was summoned in five diacetylrelated litigations relating to the period when products containing diacetyl were produced in the Company’s former flavor business. During the same period, a few existing litigations were successfully closed. Chr. Hansen has insurance cover for potential losses on these claims. Please refer to note 3.8 to the Consolidated Financial Statements for further information on legal proceedings.

Financial risk

As an international business, Chr. Hansen is exposed to a number of financial risks relating to currency and interest rate fluctuations, funding, liquidity, credit and counterparty risks.

Developments in 2016/17

During 2016/17, Chr. Hansen extended its revolving credit facility by one year until August 2022 and added a new fiveyear loan with the Nordic Investment Bank to the loan portfolio. The objective was to support the long-term capital structure and liquidity ratio. Please refer to note 4.2 to the Consolidated Financial Statements for further information on these risks.

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