Risk Management and Preparedness at SABIC

Today’s businesses operate in an increasingly complex global market, where those with operations in multiple markets are often exposed to greater risk. While there are inherent strategic, financial, and operational risks, common multi-national businesses’ risk factors further include the challenges of managing complex cross border supply chains, market price fluctuations, and health and safety.

These risks demand responses rooted in best practice planning, preparation, and vigilance. The global pandemic has meanwhile tested the readiness of businesses in the wake of workforce and supply chain disruption, with vulnerabilities faced head on, and business continuity challenged. However, risks such as these also present valuable opportunities for growth and innovation that can help drive business value in the longer term.

ENTERPRISE RISK MANAGEMENT

At SABIC, our risk management policy is to proactively identify risks, their potential impact on the business and to develop appropriate risk response plans. Designed to safeguard the interests of our stakeholders, SABIC’s Enterprise Risk & Data Management function is focussed on ensuring a comprehensive Risk Management & Business Continuity Framework is applied across the organization as well as improving our data and process governance structure. 

SABIC’s Board Risk & Sustainability Committee, along with the Executive Risk Management Committee, is integral to effectively identifying and understanding risk through the development and sustaining of risk management and reporting processes, alongside internal control systems and insurance programs.

By establishing governance policies and ensuring regulatory compliance, the Committee both supports and is supported by our wider management and employee community – a holistic ecosystem integral to SABIC’s unified culture of good governance, responsibility, and risk mitigation.

ENVIRONMENT, HEALTH, SAFETY AND SECURITY (EHSS)

Effective risk management begins with fostering a culture of good governance. That is why Environment, Health, Safety and Security (EHSS) standards underpin SABIC’s core values. The SABIC Assurance Program for EHSS Risks (SAFER) is the cornerstone of managing risks and a key system for identification, assessment, tracking, and mitigation. 

In 2021, 121 SABIC employees were trained on the SAFER system, where cross-functional teams identified high-consequence process safety scenarios and studied major incidents and near misses to establish robust safeguards for prevention. Moving forward, we will continue to develop the SAFER program, deploy the program across more regions, and train our employees on how to work with the system, in line with our EHSS strategy. Across all our stakeholders - from employees, leaders and contract partners to our customers and our communities – we expect and demand that we excel in protection of human health, safety, security, and the environment in compliance with all applicable local, regional, and national laws and regulations in regard to EHSS.  

OPERATIONAL EXPOSURE AND RISK FACTORS

As a leader in the petrochemicals industry, SABIC faces risks linked to changes in the global economic environment. In the last decade, the global economy has continued to experience periods of stagnation, volatility, and erosion of consumer confidence. These are all key variables which have affected downstream demand for chemical and plastic products in certain industry sectors and regions. Any downturn in regional or worldwide economies, market crisis or prolonged periods of instability could have a material and adverse effect on SABIC’s business operations.

Our operational performance is particularly influenced by economic cycles affecting end-user industries and our operations can be impacted by fluctuations in the prices of commodities, primarily oil, its derivatives and gas. Many of SABIC’s sales relate to petrochemical products, prices of which are inexorably linked to changing oil prices. 

The industries in which we operate are highly competitive. A core component of our business strategy is to continually innovate to create and deliver new products and processes, to create value for our customers and partners.

SUPPLY CHAIN RISK MANAGEMENT

Another area in which risk is inherent is supply chains. We are always focused on our long-term growth ambitions, leveraging the strength of our global supply chain. Working closely with our customers and logistics service providers, 2021 saw us successfully deliver 33 million tons of products to nearly 12,000 customers in over 130 countries. Our infrastructure proved resilient and our people adaptable. Service levels were improved, and efficiencies achieved through the efforts of cross-functional teams, with targets met, inventories well managed, and product delivered, including urgent supplies to address the crisis caused by the pandemic.

Supported by SABIC’s advanced digital solutions, our Executive Risk Management Committee’s robust understanding of supply-side risks is enabled by visibility across the extended supply network which in turn supports implementation of corresponding policies to safeguard our customers and employees. As we move into a new global era, our Global Supply Chain will continue its ongoing program of becoming ever more efficient, responsive, and reliable – attributes critical to realizing our 2025 vision of being the world’s preferred leader in chemicals.