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Risk ManagementEmbraer always maintained its risk management closely tied to strategic and operating planning processes, in order to protect and sustain its activities as well as the material and financial resources employed in its operations. In addition to monitoring every aspect of its value chain, from the acquisition of raw materials to customer after sales support, Embraer follows closely the financial, economic, political, and social scenarios and assesses ways to protect itself against risks associated with its key business segments. In order to increase the Company´s responsiveness to unexpected changes in a scenario, Embraer is implementing a project to monitor key business risks through its management information system.
Because of the complexity and degree of technology involved in the production of its aircraft, Embraer seeks to ensure, by means of long-term agreements and partnerships, the supply of raw materials at stable prices and of a number of components employed in its aircraft, regardless of the fluctuations affecting the commodities employed in the manufacturing process. The general condition of airlines worldwide is also constantly monitored by the Company, in order to provide us with an improved perception of the current situation and financial standing of our target customers. All aircraft manufactured by Embraer undergo strict inspection and quality assurance processes. They are certified by aeronautic certification authorities such as CTA, FAA, and EASA, among others, which means that they are submitted to a comprehensive program of tests prior to being granted approval for carrying passengers. Risks in connection with the aircrafts’ civil liability are duly covered through insurance. In order to comply with sections 302 and 404 of the Sarbanes-Oxley act, the internal control structure of the pertinent processes that pose risks to the financial statements are undergoing assessment, documentation, and tests since 2002, as required by the Public Companies Audit Oversight Board (PCAOB), with the use of world-acknowledged methodologies and criteria. Despite having a natural hedge to cover its financial transactions, as 85% of its Cost of Goods Sold are dollar-denominated and roughly 95% of its sales are undertaken with this same currency, Embraer carefully monitors the foreign exchange and interest rate markets in order to reconcile cash position and indebtedness, thus side-stepping undue exposure in one single asset in order to minimize the effects of these markets’ volatility. Always in line with the guidelines and limits agreed on with the Chief Financial Officer, the treasury department employs a wide range of instruments available in the capital markets, such as swaps, futures, and derivatives, in order to perform its transactions in the constant pursuit of liquidity and transparency, in the local as well as in the global markets. Preservation of the environment is an ongoing concern to the Company’s management in the manufacturing process, the implementation of new industrial facilities, or the development of a new product. All of Embraer´s projects are in accordance with the applicable environmental laws and take into consideration the residues produced by the Company’s day to day activities, in addition to the recycling of materials used for a variety of purposes, from milk cartons and other packaging materials to organic residues and metal particles arising from the industrial process. The material recycling and re-use rates have been growing annually as a clear result of the environmental policies adopted by the Company, which is ISO 14001 certified. With a view to protecting its assets, Embraer has adopted a policy of contracting insurance with appropriate limits in order to cover the risks inherent to its business. Thus, through insurance, the company is protected from events that cause damages to society, employees, Company assets, and its ability to generate profits. Furthermore, insurance covers customer obligations stated in aircraft sales agreements. Embraer strictly controls its supply chain and is thus able to mitigate the continuity risks inherent to its complex production network. The risks arising from the Company’s contractual liabilities are under continuous monitoring in order to ensure that the resulting exposure remains at acceptable levels. Embraer´s business is based on knowledge and technology. Hence, it is crucial that the risks in connection with information security and intellectual capital should be kept at acceptable exposure levels. Embraer´s information systems are duly protected from external or internal unauthorized access. The plant facilities are also subject to controlled access, and awareness programs on the importance of protecting information are constantly made available to all employees. More information about the Model of Corporate Governance
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