Strategic Report

Our Risks continued

Key risk

Revenue generationin established andemerging markets

Potential impact on our business

How we respond

What we have done in 2014

Failure to follow our customers as they
move into emerging markets, or tocontinue to grow in established markets
will adversely impact delivery against ourstrategic objective of delivering consistent
top and bottom line growth.

Our local sales teams sell directly to customers andmaintain excellent relationships at all levels in theirorganisation. They speak our customers language,with market and industry training and backgrounds.
We have established research and development
centres, customer centres and manufacturingcloser to our customers.

Moved to a global organisation
structure. We have expanded
capacity in Asia and Latin
America to shorten ourcustomers’ supply chain.
We opened up a new sales
office in Houston and created a
dedicated EEMEA commercial
team separate from WesternEurope. We expanded our R&D
groups in China, Singapore,
Brazil, France and the UK.

The Group has grown throughacquisitions and continues to pursue
them to meet its strategic objectives.
A failure to identify new business areas
or extend our portfolio could impact ourability to grow. Our success in realising
the benefits of acquisitions depends
on focused due diligence before
acquisition, the integration of theacquired businesses, and theirperformance in relation to expectations.

The new Executive position of President of Corporate
Development has a remit to identify new strategicacquisition opportunities and to work closely with
our market sector Presidents. Each businessarea has a strategic plan which includes a review
of demand and of potential new opportunities,
which are regularly monitored and challenged.

We appointed a Presidentof Corporate Development,
an Executive position, fromApril 2014 to identify strategic
growth opportunities.
Acquisition opportunities
have been identified withthe full engagement of themarket sectors.

Innovation plays a critical role across
our operations; it differentiates us fromthe competition, protects sales andimproves our margins. Failure to drive
innovation will impact on growth.

We have a Chief Technology Officer at Board level.
We have identified seven key technology platforms
which we believe will drive innovation.

1  Delivering consistent top
and bottom line growth

Identification andintegration ofacquisition targets
1  Delivering consistent top
and bottom line growth

Product andtechnology innovation
2  Increasing the proportion of Newand Protected Product sales

Protect newintellectual property
2  Increasing the proportion of Newand Protected Product sales

30

Croda Annual Report and Accounts 2014

Expansion into new markets andtechnologies has increased our riskof failure to protect our intellectual
property, which could undermine
our competitive advantage.

Our Technology Investment Group is integrated
within our market sectors to identify newtechnology acquisition opportunities.

We have outstanding technical resources in place,
who focus on internal innovation projects. We
partner with customers, universities and developersof emerging technologies and invest in externalacquisitions to remain at the cutting edge.

We have a dedicated professional IntellectualProperty (IP) team who participate in the technicaland business planning and strategy meetings
to identify new products and technologies which
may require protection. They monitor our IP andchallenge infringements where necessary.

Responsibility for theintegration of our recentacquisitions (Sipo, JD Horizonsand AM Coatings) has been
assigned to senior managers.
Established a new process
innovation team from January
2014 to consider, differentiatedclass leading technologies togive our products a technicaledge. Globalised thetechnology group.
Two external acquisitions
brought new technology
and expertise to the Group.
Differentiation and protectionof many of our new products,
including our rangeof excipients for thepharmaceutical industry,see page 16.

Risk decrease
Risk increase
No change

Link to Strategic Objectives12

3

p20

Employee recruitment,retention and motivation
3  Investing in asustainable future

3  Investing in a

What we have done in 2014

The vision and experience of ourknowledgeable and specialist
employees is critical to maintaining
the Group's success. A lack ofappropriately skilled people could
adversely impact our ability toperform in line with expectations.

Our framework of development and reward
programmes, strong culture and world classlearning and development opportunities support
the retention and career development of the highquality teams we need. All Croda regions offergraduate development programmes, involving
stretching and high profile assignments, and ourstructured development programmes, such as theCroda 2020 network and Leadership Development
Groups, nurture internal talent. Our global appraisal
system, Aspire, supports the annual personal
review process.

The Executive has focusedon developing a people
strategy for each of our market
sectors which fully supports
and aligns with the Businessstrategy and ensures that ourcurrent high retention rates
continue. Importantly, deliveryof the strategy will ensure thatthe pipeline of talent willcontinue to be filled.

We rely on key employees whose visionand knowledge is critical to maintaining
our success. If these individuals were toleave with no succession plan in place,
it would take some time to replace them.

On an annual basis our talent review process
considers succession plans for critical roles
throughout the organisation. Output and actions
arising from these reviews are monitored by the
Executive and the Board to ensure that succession
planning continues to be a focal point.

Our new Group HR Director
appointed in April 2014 hasprovided focus and leadershipto a renewed and more rigorous
succession planning process.
Areas of higher risk havebeen identified and arebeing addressed.

We sell into a number of highly regulated
markets. Non compliance with quality
regulations could expose us to liability
and reputational damage especiallyin the light of our commitment
to sustainability.

Our Head of Global Quality Assurance leads ourquality programme. Many of our sites are EFfCI
GMP-certified and several have the EXCiPACT™
quality standard. These are demanding quality
standards valued by our customers. We work
proactively with relevant trade associations
to shape future regulation, see page 36.

The Board reviewed this risk
with a presentation from theExecutive risk owner. We
communicated a new Group
Quality policy and started
working on a supporting
manual. Quality reporting
is now incorporated into
the quarterly GroupSHEQ meetings.

We rely on the continued operationof our manufacturing sites around theworld. Certain sites are particularly
critical to the Group due to their sizeor what they produce.

We have comprehensive global Safety, Healthand Environment (SHE) policies, proceduresand guidelines which are defined in the GroupSHE manual. Our network of SHE specialists
and process safety engineers at each site ensurecompliance on a day to day basis, and all site
processes undergo a Process Risk Review atfive yearly intervals. A rotational SHE assurance
programme is undertaken by our specialist audit
team to assess compliance with the Group SHE
manual with a comprehensive issue follow up
process. External audits assess compliance with
our OHSAS 18001 and ISO 14001 certifications.

The Croda Hazard Study
Leader’s Academy marked its
first full year since its diploma
was certified by the Universityof Derby.

sustainable future

Product liability claims
3  Investing in asustainable future

Major safety incident
Major environmental
incident
3  Investing in asustainable future

A major event causing loss ofproduction, or violating safety, healthor environmental regulations could limit
our operations and expose the Groupto liability, cost and reputational damage,especially in the light of our commitment
to sustainability and customer service.

The SHEQ steering Committee meets quarterly
to monitor and review progress against safety
and environmental KPIs and targets.

We continue to develop ourbalanced score card of leading
lagging process safety KPIs,
which are subject to formal
quarterly review by the SHEQ
Steering Committee, and canprovide an early warning
system for any problems.

We go beyond the basic regulatory requirements
setting stretching safety, health and environmental
targets, see page 34.

Croda Annual Report and Accounts 201431

Other Information

We have business continuity plans in place foreach site and a Group crisis management plan
which is tested at least annually.

A new Group SHE manager
was appointed to develop
and lead our specialist GroupSHE audit team.

Financial Statements

How we respondDirectors’ Report

Succession planningfor senior positions

Potential impact on our business

Strategic Report

Key risk