BASF Report 2021 Management’s Report – Opportunities and Risks 153 Tools Organization of BASF Group’s risk management – The Governance, Risk Management, Compliance (GRC) Policy, applicable throughout the Group, forms the framework for risk Supervisory Board management and is implemented by the operating divisions, the External auditors a service and research units and the regions according to their spe- Corporate Audit cific business conditions. Board of Executive Directors – A catalog of opportunity and risk categories helps to identify all Chief Compliance Officer relevant financial and sustainability-related opportunities and risks as comprehensively as possible. We also systematically assess Risk Committee opportunities and risks with effects that cannot yet be measured in monetary terms, such as reputational and climate risks. To Corporate Center reflect these, risks for companies in connection with the transition Corporate to a low-carbon economy (transition risks) as well as physical risks Corporate Corporate Corporate Legal, Corporate Corporate Corporate Corporate Development Finance Compliance & Taxes & Environmental Human Communications & Investor Relations as defined by the Task Force on Climate-related Financial Disclo- Insurance Duties Protection, Resources Government sures (TCFD), among others, were added to the catalog. Health & Safety Relations – Because global climate policy ambitions and the implementation of the relevant measures play a decisive role in the ongoing growth of the chemical industry and its customer industries, global long- term scenarios (up to 2050) with various global warming paths Divisions Regions Service units Research units were defined. To assess the impact of different global climate a The Corporate Audit unit is part of the Corporate Center. policy approaches on our business units, the scenarios were discussed by the business units in workshops. Their feedback will be incorporated into the further development of scenario Executive Directors are also expressly obligated to follow these applicable in the European Union, defines the significant processes assumptions and outcomes. A dataset of scenario-specific principles. and deadlines for the Group. There are binding directives for the macroeconomic parameters will be provided to test the eco- For more information on our Group-wide Compliance Program, see page 171 onward internal reconciliations and other accounting operations within the nomic feasibility of investments and business strategies. Group. Standard software is used to carry out the accounting pro- For more information on our sustainability management processes, see page 45 onward cesses for the preparation of the individual financial statements as Significant features of the internal control and risk well as for the Consolidated Financial Statements. There are clear – We use standardized evaluation and reporting tools for the identi- management system with regard to the Group rules for the access rights of each participant in these processes. fication and assessment of risks. The aggregation of opportuni- financial reporting process ties, risks and sensitivities at division and Group level using a Employees involved in the accounting and reporting process meet Monte Carlo simulation helps us to identify effects and trends The Consolidated Financial Statements are prepared by a unit in the the qualitative requirements and participate in training on a regular across the Group. We also aggregate qualitatively assessed risks Corporate Finance department. The Consolidated Financial State- basis. There is a clear assignment of responsibilities between the at Group level using a risk portfolio. ments are derived from the separate financial statements of the specialist units, companies and service units involved. We strictly – Our Group-wide Compliance Program aims to ensure adherence subsidiaries and joint operations, taking into account the relevant adhere to the principles of segregation of duties and dual control, or to legal regulations and the company’s internal guidelines. Our data for the joint ventures and associated companies accounted for the “four-eyes principle.” Complex actuarial reports and evaluations global employee Code of Conduct firmly embeds these manda- using the equity method. The BASF Group’s accounting process is are produced by specialized service providers or specially qualified tory standards into everyday business. Members of the Board of based on a uniform accounting guideline that, alongside accounting employees. policies based on the International Financial Reporting Standards