Risk Management


In accordance with the regulatory guidelines requiring companies to adopt appropriate Corporate Governance models, and in response to market demand for ever-increasing transparency and disclosure on the risks associated with company activities, CNH Industrial has implemented and adopted its own Enterprise Risk Management (ERM) system.

 risk management CNH

The ERM process was also driven by the need for a systematic approach to identifying the risk profile of business activities, and adopted to manage business performance from an integrated risk-return perspective. Furthermore, this process reflects the Company’s commitment to sustainability, as it provides for internal audits to incorporate regular assessments of potential risks deriving from the environmental and social impact of the Company’s business activities.

CNH Industrial’s ERM methodology defines risk as any event that could impact the Company’s ability to meet its objectives.

The model, developed internally in 2004 by Fiat S.p.A. prior to the demerger, and since adopted by all current CNH Industrial legal entities, enables the timely identification of risks and the evaluation of their significance, and allows action to be taken to mitigate and, where possible, eliminate them. Taking the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as a starting point, the model was then adapted to the Company’s specific requirements, and has been updated to incorporate the experience gained over the years and the best practice indicators that emerged through comparison with other industrial groups. The current catalogue consists of 52 risk drivers, further broken down into 85 possible risk events. Risk driver mapping includes several significant issues, such as climate change, macro-economic developments, joint ventures, etc. The model classifies risks according to the probability of occurrence and potential impact on profitability, business continuity, and reputation (or on a combination of these elements), which determine the significance of a risk when analyzed as a whole. For events that exceed predetermined significance thresholds, existing measures are analyzed and future containment measures, action plans, and persons of reference are identified. This process, supported by a dedicated information system, follows a bottom-up analysis starting at business unit level. The heads of the business segments involved are required to approve the evaluations, while Corporate Control is responsible for their coordination and consolidation within the Company.



CNH Industrial believes in preventing losses that could potentially lead to property damage or business interruptions. The Risk Management Center of Competence2 addresses all stages of pure risk management including risk identification, analysis, and treatment (including loss prevention).

The four pillars of risk management consist in:

  • preventing accidents or limiting their effect 
  • adopting the highest standards for the prevention of property loss 
  • minimizing the cost of risk by optimizing loss prevention, investments, self-insurance, and risk transfer programs 
  • centralizing and consolidating relationships with global insurance markets.

The Risk Management Center of Competence is responsible for overseeing pure risks (e.g., fires, explosions, or natural disasters) and related insurance coverage, and plays a central role in the management of events that could potentially impact the continuity of operations or the integrity of physical assets (in particular, the Company’s 500 sites worldwide3).
The risk management process is executed with maximum transparency and the highest level of expertise, supported by consulting companies specializing in industrial risk that perform field audits to ensure in-depth, continuous, and impartial risk assessments across the entire Company.
In 2014, the Risk Management Center of Competence managed 92 sites, representing 91% of the insured value.
To achieve constant and efficient industrial risk monitoring, a selection process ensures that 98% of the sites within the perimeter scope are surveyed every 3 years, and more than 50% surveyed every year.
In 2014, 36 sites were inspected (covering approximately 58% of CNH Industrial) and 126 new projects were tracked, verifying the highest level of compliance with international loss prevention standards.
During the year4, CNH Industrial’s investment in loss prevention and mitigation measures totaled around $10.09 million, of which $7.44 million in recommended improvements to align the sites to CNH industrial’s loss prevention referenced standards, and $2.65 million in major extension and green field investments.
These targeted investments cut loss expectancies by approximately $0.8 billion, resulting in a Global Efficiency Index (GEI) of 0.965 in line with the highest international standards.

CNH Industrial’s Risk Management Center of Competence works to develop forward-looking, risk engineering approaches and solutions. This is particularly evidenced by the development of specific projects that highlight the contribution of risk management to addressing climate change issues.
Current Company Risk Management projects include:

  • a new approach to insurable environmental risks 
  • earthquake risk re-engineering 
  • climate change impact analysis 
  • carbon emissions avoidance through effective loss prevention 
  • supply chain risk mitigation through improved confidence.

The Risk Management Center of Competence provides a critical, real-time contribution to the Company’s sustainable development and competitive advantage in a fast-changing, competitive, and global business environment, with a focus on:

  • fine-tuning existing tools, processes, measurement, and modeling of risks, in order to facilitate a more complete risk-based business decision analysis and the evaluation of emerging risk-based opportunities 
  • integrating and consolidating risk management programs 
  • developing risk awareness across the organization 
  • creating a cross-functional risk management committee that will periodically review all areas of CNH Industrial’s enterprise risk management.

Insurable Environmental Risks

CNH Industrial’s Risk Management has developed an innovative risk management methodology in collaboration with: the Company’s EHS (Environmental Health and Safety) departments, a major international consultancy and certification firm, and an insurance partner. This methodology has enabled CNH Industrial to:

  • obtain objective, quantified knowledge of insurable environmental exposures 
  • improve risk profiles according to the segments’ EHS strategies
  • identify and clearly communicate priorities and benefits 
  • effectively inform the insurance market about the loss prevention activities in place to prevent or mitigate potential environmental losses 
  • obtain adequate environmental insurance coverage, commensurate with risk exposures and current loss prevention activities 
  • carry out prevention activities in line with Company strategies.

The methodology, which is scientific and implemented via a certified self-assessment tool, was used to assess and analyze 46% of the Company’s total insured value in 2012-2013 (100% of EMEA).
To validate the data obtained in 2013 and 2014, a field visit campaign was launched to a selected number of sites considered representative in terms of size, occupancy, and geographical distribution. Visits were organized by the central EHS Department of each legal entity, and conducted by the specialized environmental risk engineers of a leading environmental insurance company.
This extraordinary effort resulted in the development, for both CNH Industrial and its subsidiaries, of the first environmental maps quantifying the overall levels of risk.
These results were presented to the insurance market as evidence that CNH Industrial’s environmental risks are known, well-quantified, and properly managed. The results also led to comprehensive global insurance coverage.

Earthquake Risk Re-engineering Project

Today, CNH Industrial’s Risk Management benefits from the long-standing research project carried out with AXA MATRIX Risk Consultants and the Università degli Studi di Napoli Federico II, aimed at developing cutting-edge, quantitative, seismic risk assessment methods and scientifically-based, risk management procedures.

The workgroup developed an Integrated Approach to Seismic Risk Assessment and Management, which is a multilevel framework simultaneously allowing for advanced seismic risk assessment and a rational allocation of resources.

The methodology enabled the Company to:

  • efficiently assess 
  • properly quantify 
  • proactively manage 

the seismic risks the Company’s industrial manufacturing sites are exposed to.

The research project adopts a multilevel and quantitative approach, i.e., a procedure capable of considering different knowledge levels as inputs and of providing a quantitative measurement of seismic risk:

  • level 1 – relative, mainly for prioritization purposes 
  • level 2a – absolute analysis based on existing fragility curves 
  • level 2b – absolute analysis based on computed fragility curves.

The procedure allowed classifying and prioritizing the Company’s sites based on seismic risk, facilitating decision making and the identification of the top ranked facilities potentially in need of closer analysis.

In 2014, the application of the Integrated Approach was extended in order to focus not only on building performance under seismic excitation, but also on a more rational assessment of the consequences of earthquakes in terms of economic impact on activities and contents.

Moreover, the research project was launched after the final phase of 2012’s earthquake in Emilia (Italy), marking the first ever installation of an advanced device for real-time seismic risk monitoring at a pilot plant. The objective was to provide a tool to help decision making during the hours/days after an event (during the aftershocks following a strong earthquake).

Recent seismic events affecting industrialized countries (Japan, 2011; Emilia, 2012) readily corroborate the importance of an efficient, transparent, and proactive seismic risk management system within a global manufacturing organization.

Quantitative seismic risk assessment, providing sound probabilistic estimates of potential earthquake impacts, is a key step in any meaningful and grounded decision-making process.

Climate Change Potential Impact Analysis

This project was launched to study potential new risks posed by climate change, with three main goals in mind:

  • to raise awareness across the entire organization of the potential new risks posed by climate change 
  • to explain the nature of the risks associated with climate change
  • to verify that all risk management processes in place, as well as new measures under development or yet to be developed, take account of climate change.

The rainwater project was implemented to develop a methodology to analyze potential rainwater risk based on the gap analysis between the design data used at the time of building construction, and the current design data according to occupancy and latitude (as per internationally recognized construction standards).

The rainwater risk project allowed:

  • identifying relevant data on plants’ rainwater collection and disposal networks 
  • creating an ad hoc form to collect and report key data 
  • developing a methodology to identify and extract current design data based on specific occupancy and latitude
  • developing specific gap analysis software (to compare construction design data with current design data) 
  • identifying intervention priorities considering both the gap and the values at risk.

Mitigating Supply Chain Risk through Improved Confidence

Managing supply chains in today’s competitive world is increasingly challenging. This is particularly true in the equipement industry due to:

  • market globalization
  • processes that are more intertwined and integrated between companies 
  • increased use of manufacturing, distribution, and logistics partners resulting in complex international supply network relationships 
  • reduced buffers 
  • increased demand for on-time deliveries in shorter time windows and with shorter lead times 
  • shorter product life cycles and compressed time-to-market
  • sudden and substantial ramp-up capacity limitation of key components.

Supply chain risk management, with an internal and external focus, is progressively becoming a common management priority, given that any company proactively handling risk will not only focus on its own, but also on the risk within its supply chain.

In 2013, Risk Management reassessed, identified and listed key suppliers, based on a semi-quantitative approach using the data collected by field engineers during plant surveys and discussed with plant management.

In 2014, Risk Management developed a second project with the support of the Purchasing Departments and Sustainability Teams.

The project’s goal is to collaborate with suppliers in collecting adequate information to verify and ensure that the suppliers’ Risk Management departments are implementing the necessary processes to secure supply flow.

This project was approved by top management in June, and four key suppliers were selected for pilot testing.

Precautionary Principle

CNH Industrial’s commitment to safeguarding the environment is based on a precautionary approach, aimed at anticipating potential risks that could impact the environment and human health. CNH Industrial applies the precautionary principle introduced by the Rio Declaration on Environment and Development, both in designing its products and in managing its manufacturing processes. The process of product development (see also page 146) identifies, within its various phases, appropriate deliverables designed to anticipate future regulations on environmental issues related to product use. Special focus is given to solutions that favor the use of recycled materials and exclude the use of hazardous substances that are monitored through the IMDS database, which is updated directly by suppliers (see also page 145). Furthermore, innovation projects carried out in partnership with leading universities across the world ensure CNH Industrial access to the latest scientific developments regarding product aspects (see also page 137).

Through a consolidated environmental management system and the implementation of World Class Manufacturing (WCM), CNH Industrial evaluates the magnitude and importance of all impacts, as well as governing processes systemically and managing its environmental and social aspects, aiming at continuous improvement. Many voluntary initiatives are carried out within plants to mitigate the environmental impact of manufacturing processes. In 2014, over $56 million was spent on environmental protection (over 13% increase compared to 2013), of which $21 million was spent on prevention and environmental management. This demonstrates CNH Industrial’s strong commitment to reducing its environmental footprint, involving all impact factors, including: the selection and use of raw materials and natural resources, their processing, the management of product end-of-life, component remanufacturing (see also page 227), and product disposal.

(1) Pure risks are risks resulting from natural causes or accidental or malicious acts (fires, explosions, floods, etc.) that may result not only in damage to goods or facilities, but also in the short- or long-term interruption of operations.
(2) The risk management process is led by FCA Risk Management, which provides its services to CNH Industrial.
(3) Source: 2015 Insurance Renewal; the term “site” refers to an individual unit, identified by a company, employer or business area, on which a specific risk assessment is performed. Therefore, every manufacturing plant may be broken down into more than one site.
(4) Figures relate to the period from July 1, 2013 to June 30, 2014 (Insurance Year).
(5) Global Efficiency Index for loss mitigation measures (GEI = reduction of expected damage/cost of protection) is recognized as a measure of best practice for industrial risk management.




G4-EC2; G4-46; G4-14