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4.5 Risk Management

There are inherent risks in Accell Group’s business activities and organisation. Accell Group may fail to meet strategic, operational and financial objectives 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 with respect to innovation, development and marketing. At the same time, the company has a low risk appetite when this pertains to product safety. The risks the company is unwilling 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, with the aim of 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 how Accell Group has organised its risk management.

Risk management system

The risk management system comprises the following components: 

  • Identifying and weighing 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 illegal acts 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 organised at operating company level, while the organisation of the supply chain and HRM is increasingly managed at group 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 group-level employees 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.

Incident Taiwan
In early 2016, it became clear that an employee at a subsidiary in Taiwan had managed to steal from the company. This was due to a combination of circumstances, in which the employee concerned was able to abuse systems, processes and trust to circumvent the existing internal control measures around this company and misuse the availability of certain payment systems. The measures from the recovery plan drawn up after this theft were executed in 2016. 

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, Accell Group conducted an extensive inventory of internal and external risks which the members of the Board of Directors and the management of the subsidiaries assess individually for their potential impact on the company. The control measures of the main risks are also assessed. The Board of Directors aims to continuously assess the system and make any necessary improvements. The Board of Directors periodically discusses the outcome of the risk analysis and the main risks with the Supervisory Board.

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

Internal risk management and control system
To safeguard 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 embedded in the company’s information systems. This system was tightened in line with the recovery plan drawn up following the above-mentioned theft in Taiwan in early 2016.

Risk management manual
In 2015, Accell Group drew up a risk management manual, which devotes attention to the risk management system and the organisation, as well as to risk identification, risk assessment and plans of action.

Financial administration guidelines
The personnel of the financial departments are provided with guidelines 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 guidelines 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 Internal Audit yields findings and recommendations that are used to strengthen the internal controls. The findings and recommendations are shared with the members of the Board of Directors and are subject to fixed follow-up deadlines. It has been agreed with the Supervisory Board’s audit committee that the Internal Auditor reports any high-priority findings directly to the committee. This also applies to the follow-up on previous high-priority findings.

The follow-up on high-priority findings is a regular item on the agenda of the Audit Committee meetings. 

The Accell Group Internal Control Framework also includes embedded internal procedures, guidelines and management regulations that could have a financial impact. The company has drawn up management regulations to involve the Board of Directors in important decentralised decisions and for it 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, as well as in regular consultations with the CFO, as part of the internal audit plan. The subject of fraud risk management is an item on the agenda of the controllers meeting and in consultations between the Board of Directors and the Supervisory Board. This way, the responsibility for the prevention and detection of fraud risk is brought to the attention of and shared with the local management.

In 2017, the company will continue to develop the Accell Group Internal Control Framework and the group-wide control measures. In 2017, we will use data analysis as a control tool within Accell Group’s Internal Audit department. The aim is to apply continuous monitoring through the use of data analysis, with a view to obtaining indicators from IT systems, processes and control measures, which are collated, checked and monitored on a continuous basis. The internal auditor will also review the risk management system and facilitate the 2017 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. In 2016, the company decided to add a second member to the Internal Audit department. Accell group expects to fill this position in 2017. 

External auditor
The external auditor draws up an annual audit plan. In the context of the audit of the financial statements, the external auditor carries out an assessment of the design and implementation 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 (partly in the absence of the Board of Directors).

Letter of Representation
The directors of subsidiaries each year sign a Letter of Representation, a detailed statement, 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 also signed annually by other members of the management of the Accell Group subsidiaries. 

Sparta Vedette: Good Industrial Design 2016 (The Netherlands)
The Vedette is a hybrid e-bike, in which the saddle clamp is integrated in the frame and the compact back wheel motor has been integrated in the battery. The electrical system is controlled via a smartphone. The built-in track and trace function ensures that the owner can easily trace their bike in the event of loss or theft. Dutch former professional racing cyclist and Tour de France winner Joop Zoetemelk has attached his name to the Sparta Vedette.

Other risk management measures:

  • Accell has an internal code of conduct, which was updated by the Board of Directors of Accell Group and approved by the Supervisory Board in 2013. This internal 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 have been laid down in management regulations. These include detailed regulations related to internal decision-making and communications;
  • Accell has a whistle-blower regulation, which was updated and adopted by the Board of Directors of Accell Group and approved by the Supervisory Board in 2017, following changes in legislation in Netherlands. The whistle-blower regulation has been published on the corporate website of Accell Group and ensures that any violations of existing policy and procedures can be reported without any negative consequences for the person reporting the violation;
  • In 2015, the company executed the earlier decision to organise the supply chain at group level to improve control of the availability of products for sale, and realise a reduction in working capital, especially in inventories. To this end, the company added a Chief Supply Chain Officer (CSCO) to the Board of Directors and has since set up a department with some 20 employees.

Main risks and mitigation of these risks

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
The purchasing behaviour of consumers when it comes to buying bicycles and the role of the specialist retail trade have changed dramatically in recent years. Many products are now also available online. There is a risk of channel competition.



Accell Group devotes considerable attention to market positioning and innovation to inspire consumer preferences for our products. Accell wants to ensure that its products are available via all outlets, both offline and online, where consumers want to make their purchases. The retail trade can play a service role on this front. Accell Group’s tightened strategy has a strong focus in this area. Accell Group has tightened its IT policy to place greater focus on consumer services and consumer data.


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



Accell Group uses its extensive internal knowledge and experience, including external experts. The Board of Directors is always directly involved in an acquisition. The Supervisory Board is an active partner in the acquisition process and must approve acquisitions. New companies are generally integrated into the group in the short term.

Accell Group is continuous looking for and in contact with potential acquisition candidates.

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


Operational risks  


Marketing and development
Accell Group’s brand strategy demands continuous innovation and development of attractive products, due in part to developments at its competitors. Accell Group also has to meet this challenge in the long term. There is a risk that Accell Group will fail to develop and market sufficiently innovative products. Potential changes in consumer awareness of brands and products also play a role in this.



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


Human Resource Management
Strong leadership is required to successfully execute the company strategy. A lack of sufficient leadership qualities and a lack of focus are therefore a risk to the implementation of the strategy.



To enable the management of Accell Group to implement the strategy effectively, and overcome the related strategic and operational challenges, we will:

  • Recruit with a more intensive focus on strategic capabilities (such as planning, procurement, IT, marketing, innovation and project management).
  • Conduct and follow up on the Accell employee engagement survey.
  • Introduce the Accell Talent Review programme to create personal development plans and intervene on an individual basis where necessary.
  • Amend the short-term bonus scheme for senior management to make a clear connection between the performance of Accell Group and local and personal successes.


The bicycle sector is a fiercely competitive market, with competition between existing providers and the chance that new providers and sector-related products can enter the market at any time. There is a risk that Accell Group is not sufficiently able to predict the behaviour of (potential) competitors or to respond effectively to same. Sales via different channels may lead to pricing differences. There is a risk that Accell Group may lose brand markets if it has insufficient freedom to determine the pricing of its products. 



Accell Group invests a great deal of time and money in market research, the outcome of which is used in the decision-making process.


Seasonal sales and logistical risks
Turnover is highly sensitive 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. This may result in surplus stock at the end of the season which needs to be sold at a discount.



Accell Group uses seasonal production and sales plans and aims to continuously 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 changes in supply and demand during the season. An annual collection is less important in online sales. Product innovations can be introduced throughout the entire season. The introduction of a supply chain organisation at Group level enables more effective control of the planning, which in turn increases availability and helps prevents the build-up of surplus stocks. 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. People’s growing awareness of their rights as consumers is a key development in this respect.



The company takes great care to ensure the quality and safety of its products. This includes the use of standards based in part on laws and regulations, test and control systems and recall scenarios. Accell Group has a low level risk appetite when it relates to product safety.


Import duties
Imports of bicycle components from outside Europe and the United States are subject to various types of duty. These include a general import duty (5-15%), on which certain countries enjoy a discount. In addition, imports of bicycles from China to Europe are subject to antidumping duties. The current duty for imports from China is 48.5%. This 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 European bicycle markets.



Bicycle manufacturers that import components for in-house assembly are exempt from this duty. All the Accell Group production 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 the speed of a company’s response to market developments are key factors. The share of assembly costs in the total cost price of bicycles in the higher segment is limited. This reduces the impact of a potential termination or substantial reduction of the import duty.


Financial risks


Currency and interest rate
The company’s turnover, profit and cash flow are subject to exchange rate fluctuations in (partly) non-functional currencies. This pertains primarily the US 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’s results and cash flow.



Accell Group seeks to minimise the impact of non-functional currencies and controls the transaction risk by using derivatives to cover its currency needs. 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 will be unable to 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 explained in more detail in the financial statements (section 5.6, point 3) of this 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.