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6.4 Risks and Risk Management


6.4.1 Introduction

There are inherent risks related to Accell Group’s business activities and organisation. Strategic, operational and financial objectives may not be met in full and the company also faces risks in the field of financial reporting and the application of laws and regulations. The extent to which the company is willing to run these risks in trying to achieve its goals differs per risk category. Accell Group has a relatively high risk appetite related to innovation, development and marketing. At the same time, the company has a low level of risk appetite when this relates to product safety. The risks the company is not willing to take on independently have as much as possible been transferred to an insurance company. The management of risk is an important part of the tasks of the company management, aimed at having a positive impact on the extent to which the company’s objectives are realised. Below you will find an explanation of the main risks the company faces and the way in which Accell Group has organised its risk management.

6.4.2 Risk management system

The risk management system comprises the following components:

  • Identifying and assessing the risks associated with the various strategic alternatives and formulating realistic objectives and associated control mechanisms.
  • Identifying and evaluating the main strategic, operational and financial risks and the potential impact of same on the company.
  • Developing a coherent system of measures to control, limit, avoid or transfer risks. The risk management system is tailored to the size and decentralised structure
  • of the company.

Despite the risk management and control system, material errors, fraud or violations of the regulations may occur. The system therefore provides no absolute certainty that objectives will be realised, but was developed to achieve a reasonable level of assurance with regard to the effectiveness of internal controls pertaining to financial and operational risks that may affect the organisation’s objectives.

The Board of Directors is responsible for the set-up and operation of the internal risk management and control system. Market and operational risk management is, in principle, organised at operating company level. Management and control measures relating to acquisitions, treasury, financial reporting, tax and legal issues are centralised at group level. Accell Group has a decentralised management philosophy, in which the local targets are determined in consultation between the Board of Directors and management of the subsidiaries. Progress is monitored through the financial planning cycle and management information, the risk analysis and regular visits by the Board of Directors and other employees of the Group to the subsidiaries. The Supervisory Board is responsible for supervising the performance of the Board of Directors, and specifically monitors the strategic risks and the set-up and operation of the risk management and internal control systems.

Taiwan incident
In order to investigate the nature, cause and impact of the detected theft, Accell Group assigned an international forensic accountancy firm. Accell Group immediately asked for legal support and reported the theft to the local police. After careful analysis, the investigation concluded that the theft has to be considered as an isolated case, which only occurred at AAT in Taiwan. Additionally, it can be concluded that the theft could occur because of an unfortunate combination of events, in which the employee involved has been able to circumvent and misuse the availability of certain payment facilities by misappropriation of systems, processes and trust. The investigation also resulted in a recovery plan in which Accell Group explains the measures taken to undo the effects of the theft and to tighten the system of internal controls and includes systems, procedures and organization. The recovery plan also comprises a project plan in which further measures are worked out. The findings from the investigation are analyzed numerically as well as qualitatively.

Risk analysis
The Board of Directors and the management of the subsidiaries draw up periodical analyses of the strategic, operational and financial risks. For the purpose of the risk analysis an extended inventory was conducted of internal and external risks which are reviewed by the members of the Board of Directors and management of the subsidiaries individually on possible effects on the company. The control measures of the main risks are also assessed. The Board of Directors aims to constantly assess the system and improve them where necessary. The outcome relating to the risk analysis and the main risks are discussed periodically with the Supervisory Board.

Financial planning cycle and management information
The various subsidiaries draw up a strategic plan each year based on the main development in the company’s operating environment. Once harmonised and approved, these plans are translated into annual budgets. The consolidated strategic plan and budget are discussed with the Supervisory Board. Management information reports are compiled on a daily, weekly and monthly basis. Latest estimates are drawn up at least three times a year. The budgets and latest estimates are reviewed against the actual results on a monthly basis and the outcome is reported to the Board of Directors.

Internal risk management and control system
To ensure the quality of the company’s financial reporting and operational audits, Accell Group uses an extensive system of administrative organisation and internal controls. The internal control system is largely anchored in the company’s information systems.

Financial administration guidelines
The personnel of the financial departments are provided with directives and instructions pertaining to the set-up and maintenance of the financial administration and reporting systems. Details of these are provided in a reference document. The directives and instructions comply with the prevailing IFRS standards.

Internal audit
The Internal Auditor carries out his tasks on the basis of a detailed internal audit plan, a predetermined assessment framework and the Accell Group Internal Control Framework. The Accell Group Internal Control Framework outlines the inherent risks for each process and the related internal control measures. The findings and recommendations of the Internal Audit are used to strengthen the internal controls. The findings and recommendation are then shared with the members of the Board of Directors and are subject to fixed follow-up deadlines. The findings with high priority are reported directly to the Audit Committee. This also applies to the follow-up on previous high-priority findings.
 The Accell Group Internal Control Framework also includes embedded internal procedures, guidelines and management regulations that can have a financial impact. The company has drawn up management regulations to involve the Board of Directors in important decentralised decisions and to grant approval for such decisions, frequently in writing.

In recent years, internal audits were conducted at various Accell Group subsidiaries and attention was devoted to group-wide control measures. The subject of fraud is discussed with the local management and in regular consultations with the CFO, as part of the internal audits. This also draws attention to the responsibility for the prevention and detection of fraud risk and shares same with the local management.

In 2016, the company will continue to develop the Accell Group Internal Control Framework and the group-wide control measures. The responsibility for maintaining the Accell Group Internal Control Framework will be vested in the Accell Group subsidiaries. In addition, the internal auditor will review the risk management system and facilitate the 2016 risk analysis.

In addition to the previously mentioned regular internal audits, the Board of Directors or the audit committee may request specific ad hoc audits.

External auditor
An annual audit plan is drawn up by the external auditor. In the context of the audit of the annual financial statements by the external auditor an assessment is carried out regarding the set-up and presence of the most important internal controls of the business processes. This is reported in a formal letter to the management. The most important findings are discussed with the plenary Board of Directors and also with the Audit Committee of the Supervisory Board.

Letter of Representation
he directors of subsidiaries each year sign a Letter of Representation, which is a detailed declaration, related to financial annual reports and the presence and functioning of the internal control systems. For this detailed statement, the company has drawn up a checklist of subjects that is signed annually by other members of the management of the Accell Group subsidiaries as well.

Other risk management measures :

  • Accell has a Code of Conduct that has been updated by the Board of Directors of Accell Group and approved by the Supervisory Board in 2013. The Code of Conduct applies to all personnel of Accell Group and its subsidiaries and is published on the Accell Group corporate website;
  • The basic premises for the directors of Accell Group’s operating companies are provided by management regulations. These include detailed regulations on the subjects of internal decision making and communications;
  • Accell has a Whistle blower procedure that has been updated by the Board of Directors of Accell Group and approved by the Supervisory Board in 2013. The Whistleblower procedure has been published on the corporate website of Accell Group and ensures that possible violations of existing policy and procedures can be reported without any negative consequences for the person reporting the violation;
  • In 2013 it was decided to coordinate the inventory management on a central level in such a way to gain more control on the effects of the decentralized structure of the logistics organisation with regard to the level of inventories.

6.4.3 Risk analysis and mitigation

The results of Accell Group are affected by the general economic conditions and the economic outlook of the countries in which the company is active. The conditions in the key purchasing markets also play a role. The following overview is not an exhaustive list of risks to which the company is exposed.

Strategic risks

Changes in the market
Behaviour in the market may change. Reduced consumer confidence may inspire consumers to postpone large expenditures, while dealers may reduce their stocks by postponing purchases when faced with more limited financing opportunities.


Accell Group devotes considerable attention to brand positioning and innovation to inspire consumer preferences for our products. Active dealer management ensures that dealers have the tools to increase their turnover of Accell Group products. The Accell Group organisation must be flexible, so it can respond quickly to changing market demands.

Accell Group’s growth strategy is partly dependent on acquisitions. However, it is possible that acquisitions may not meet expectations and the goals set. This pertains to estimates and assessments made during the acquisition process and also to integration following the acquisition. Secondly, it is possible that Accell Group cannot execute its acquisition strategy because it is not sufficiently successful in acquiring suitable companies.

Accell Group uses varying internal know-how and experience, and also hires external experts. The Board of Directors is always directly involved in an acquisition project. The Supervisory Board is an active partner in the acquisition process and must approve acquisitions. Also in some cases the bank consortium must approve acquisitions.

New companies are generally integrated into the group in the short term. Accell Group is constantly looking for and in contact with potential acquisition candidates

The changing conditions in the worldwide economy and changing financing opportunities may make it more difficult or even impossible to finance acquisitions. Acquisition parties with greater capital strength may be at an advantage in those situations.

Operational risks

Marketing and development
The brand strategy of Accell Group demands continuous innovation and development of attractive products, due in part to developments at its competitors. This challenge must also be met in the long term. There is a risk that Accell Group will fail to develop and market sufficiently innovative products. Changes in consumer awareness of brands and products also play a role in this.


Accell Group continuously invests in the development of its brands and products. The availability of talented and motivated managers and staff is a key factor in this respect. The management teams of the companies are assessed periodically.

The bicycle sector is characterized by intense competition between existing providers, while at the same time new providers and sector related products enter the market. There is a risk that Accell Group is not sufficiently able to predict the behaviour of (potential) competitors or to respond to it adequately.


Accell Group spends a lot of time and money on market research, the outcome of which is used in the decision making process.

Seasonal sales and logistical risks
Turnover is subject to a great extent to seasonal influences. Bicycles are sold primarily in the spring and summer. There is a risk that the company will not be able to adapt quickly enough, which could put pressure on timely deliveries. The weather may also affect seasonal sales. Poor weather in the spring and/or particularly hot or bad weather in the summer may have a negative impact on the demand for bicycles.


Accell Group uses seasonal production and sales plans and aims to constantly improve the predictability of its sales. Long supply lines combined with the unpredictability of the weather and the sales can result in higher stock levels. The company therefore aims to be as flexible as possible in its response to supply and demand during the season. Accell Group does not use hedging products to cover the impact of the weather.

Product liability
Defects in products may result in injury to and claims from end users, which may lead to financial damage and/or damage to the company’s reputation. Increasing self-awareness among consumers is a key development in this respect.


The company takes great care to ensure the quality and safety of its products. To this end, it uses tools such as standards partly based on laws and regulations, test and control systems, and recall scenarios.

Import duties
Imports of bicycle components from outside Europe are subject to various types of duty. There is a general import duty (5-15%), while certain countries enjoy discount rates. In addition, an antidumping duty applies to imports of bicycles from China to Europe. The current duty for imports from China is 48.5%. The regulation also applies to imports of specific bicycle components from China to prevent the import of near-complete bicycles in the guise of components. The main purpose of the regulations is to prevent the import of complete bicycles at unfair price levels. The absence of such duties, or a substantial change to the level of the duty, could result in changes to the supply and demand structure in the European bicycle markets.


Bicycle manufacturers that import components for in-house assembly are exempt from this duty. All the Accell Group companies in Europe are exempt. Accell Group positions its bicycle range in the higher market segment. In terms of strategic positioning in this segment, quality and response time to market developments are of key importance. The share of assembly costs in the total cost price of bicycles in the higher segment is limited. This reduces the impact of a possible termination or substantial reduction of the import duty.

Financial risks

Currency and interest rate
Turnover, profit and cash flow of the company are subject to exchange rate fluctuations of non-functional currencies. This pertains primarily the American dollar and to a lesser extent the Japanese yen, the British pound, the Taiwanese dollar and the Chinese Yuan. Changes in interest rates also affect the company results and cash flow.


Accell Group seeks to minimise the impact of non-functional currencies and controls the transaction risk by covering its currency needs with derivatives. All derivatives used have an underlying economic basis. This principle is applied strictly to prevent potentially speculative positions. Accell Group has an active interest rate policy, partly through the use of interest rate swaps.

Financing risk
The company is partly financed via a banking facility, which is used to absorb the impact of seasonal fluctuations in working capital, or to finance (smaller) acquisitions. There is a risk that the company will not be able to obtain the required financial resources, or not obtain those resources on time, to meet its financial obligations, which may endanger the growth of the company.


Accell Group mitigates this risk with a committed group financing facility which has been agreed upon with a number of solid financing parties. The facility is in line with the characteristics of the company and provides the financing parties with sufficient transparency and security. The conditions of the committed facility are disclosed in more detail in the financial statements on page 101 of the annual report.

Further risk analysis
The Board of Directors and the local management conduct a bi-annual risk analysis as part of the risk management system, to assess the likelihood and impact of potential risks. Based on that assessment, they draw up an overview of the main risks.