Risk management and Corporate Governance
GRI 102-18

Working in a business that is both traditional and diversified, the Company and its subsidiaries are exposed to several different kinds of risk, from financial to socio-environmental. In order to manage these risks, a culture for decision making was developed, based on sound information, adopting internal policies and tools for the daily monitoring of data that support its strategy, as well as to address any issues.

In the scope of financial risk, the Company relies on the procedures established in Financial Risk Management that have been approved by its upper management, in cooperation with the Risk Committee that works to identify, assess, mitigate and monitor such issues. It provides assistance to the Executive and Board of Directors in the implementation of necessary actions to mitigate risk factors which are constantly analysed. The Company also relies on a management tool called Beef Desk, which is a Market intelligence desk, essential for decision making.

Other dimensions of risk, such as environmental and operational, are addressed by several internal policies and procedures. Approved for each business, these documents outline the procedures that must be taken by company employees, outlining any possible risks that have been identified.

The Company is based on the principles Fundamentals of Corporate Governance: transparency, fairness, accountability, and corporate responsibility.

Minerva Day 2018, Sao Paulo

The Company is in line with the regulations of the Code of Best Corporate Governance Practices by the Brazilian Institute for Corporate Governance (IBGC), and guides its actions through the regulations of the Securities and Exchange Commission (CVM). These guidelines are integrated into the matrix management model, which makes the internal procedures more dynamic and ensures greater efficiency in responding to market demands.

As a member of the B3 segment (Brazil, Bolsa, Balcão) of the Stock Market in São Paulo, the Company maintains a strict standard on the disclosure of information of its guidelines: it submits quarterly operating results and holds annual public meetings with analysts and those interested in the economic and financial performance, projects, and other perspectives issues.

At the center of the Company’s structure of governance is the Board of Directors, aligned with Auditing. In 2018, the board went through changes of its Presidency, Mr. Edivar Vilela de Queiroz was replaced by Mr. Ibar Vilela de Queiroz, and Frederico Alcântara de Queiroz assumed the role of the Vice-Presidency.

The Board of Directors is accountable for the two Executive Boards, Statutory and Non-statutory that report directly to the CEO. They are responsible for coordinating, managing, directing, and supervising executive and management tasks, in order to ensure that the mechanisms of internal control are in place to guarantee operational efficiency, the proper management of activities and businesses, as well as the assertive reporting of information that directly influence financial statements.

In addition to the Risk Committee, the structure of governance include the Ethics and Integrity Committee, in the rendering of concerns regarding conflict of ethics. In permanent advisory role as a consultant in order to assist the Board of Directors with any issues regarding risks related to the integrity and reputation of the Company.

Beef Desk

Beef Desk functions as a trading desk for commodities, aimed at providing efficiency and assertiveness in decision making. Coordinated by the area of Market intelligence, it gathers several managers from various business segments of Commercial, Planning and Production, Cattle Purchasing, Treasury, Trading and Market Risk, for daily meetings in order to exchange information and strategic decisions based on the analysis of market forces and potential curve shifts, the prices of inputs and final products, outlining a short term operational strategy. Many resources are used in order to mitigate risks in price volatility, as well as to maximize margins.

The Company also has weekly meetings; Choice Meeting and Pricing, in order to define the projections for beef cuts according to the profitability of each market, based on the analysis of aspects such as labor cost, freight and taxes.