Report of the Executive Board

OUR STRATEGY

Our strategy, Strong22, has continued to guide our activities during 2019 with a clear focus on new innovative services, products and digital engineering, to deliver high-quality expertise to our markets. We are successfully integrating digital and data capabilities with our core engineering and consultancy expertise. Investments made in 2019 supported our strategy and strengthened our portfolio. We acquired simulation software expert, Lanner; flood resilience digital solutions provider, Ambiental; and took a minority share in Hydroinformatics Institute, H2i (see page 11). We are confident that our strategy ensures our services remain relevant and we are able to assist our clients in a rapidly changing world in which we enhance society together.

Analytical intelligence

Recent years have seen an exponential rise in the capability of analytical intelligence – the ability to analyse and evaluate ideas and make decisions based on insights and data. It will continue and accelerate further, fuelled by the ever-increasing speed and capabilities that digitisation brings. These are bringing radical transformation, disruption and challenges as well as new and exciting opportunities in the industry. It is developments like these that make our strategy so important for our future business. To ensure it remains aligned, we regularly review our strategy and ways to achieve it. Part of this process includes engaging at board level (Board2Board meetings) as well as at other levels with representatives from clients and other organisations. 

Looking further ahead, we see an overarching concept that connects our heritage as an engineering  firm  with  our digital data-driven future. That concept is the digital twin – a virtual representation of physical assets. The digital twin has applications for the built environment, for entire eco systems like airports or cities, for individual assets like a hospital operating theatre or a brewery and for processes like passenger flow or manufacturing operations. We have been building our capability in this area, establishing a digital twin centre of excellence. Already, Aquasuite® provides a digital twin solution for the water sector and we have been developing its capability further in 2019. In other industries, we have worked on getting important building blocks in place. Our acquisition of Lanner and its predictive simulation technology further strengthens our digital twin offering.

Innovative products and services

Our faster, more crowded and interconnected world needs innovative solutions that help people, communities, businesses and governments to take the right decisions that help the world move forward – sustainably. Solving today’s biggest challenges involves physical solutions, smart brains and digital technology. Innovation is integral to our strategy and we have developed a structured and scalable process to boost our innovation pipeline and embed a culture of innovation across our organisation. The result is an evolving portfolio, presenting new models for service delivery, including subscriptions, and new industry openings – for example, flood-risk prediction software from Ambiental that is relevant for the insurance industry.

A joint project with Lanner and data science experts Ynformed, also a company of Royal HaskoningDHV, is exploring the use of Artificial Intelligence (AI) and simulation technologies to create more intuitive digital models for a client. This has led to unprecedented impact on balancing costs and performance,  as well as future-proofing business decisions. Another collaborative project in the water industry has identified a valuable raw material extracted from aerobic granular sludge originating from the Nereda® waste water treatment process. Called Kaumera, the material can repel and absorb water and acts as a fire retardant. It has potential applications in various industries as a viable alternative to oil-based substances. It won the 2019 Aquatech Innovation award and was described by the jury chairman as ‘by far the biggest innovative step from all of the entries received’. 

Products based on innovative technologies are continuing to grow and mature in their markets. Nereda®, our game-changing sustainable waste water technology, is proving to be a formidable player on the global stage. A new-build construction in Utrecht using Nereda® Technology won Waste water Project of the Year at the Global Water Awards 2019. Another plant in Portugal was acclaimed in the Innovation in Infrastructure category at the Water and Energy Exchange Awards, 2019. Our Ephyra® sludge digestion technology which accelerates sludge treatment and releases biogas for energy production is gaining industry prominence. Flowtack, launched last year, shows a promising trajectory. A sophisticated traffic management system which collates and analyses traffic data in real time to keep cities moving, it has already been introduced in a number of cities in the Netherlands and studies are under way for its use in various locations in the United Kingdom. 

Our moves towards optimising the use of assets driven by   data has been rewarded with a number of interesting project wins. A contract won with our tunnelling consultancy, TEC, combines the renovation of tunnels in Amsterdam with the modernisation of traffic control centres, introducing systems  to monitor and manage flow. In South Africa, our Aviation  team designed a smart security screening point which uses technology to further optimise security gates drawing on real- time passenger flow information. In Maritime, our smart ports health check provides a technology road map for clients to put the structure and processes in place to use data insights to support strategy and decision making. 

An important strand within Business Line Industry and Buildings is the energy transition. The number of services sold within this umbrella theme has doubled compared to 2018 and we anticipate it will rise more steeply. Just as the energy transition is steadily gaining traction in industry, resilience is a growing theme.

In 2019, we established an additional Business Line for our organisation, Southern Africa. It contrasts with our other Business Lines in that it is organised geographically rather than across industries. It reflects our desire to provide more focus and agility in what has been a challenging environment. The year has seen considerable restructuring of the business, with  a view to rebalancing our portfolio towards selected leading services and providing more focus on our digital approach. 

Digital engineering

We are making good progress on digitising our engineering and consulting business and reaping benefits. The transformation programme has been supported by our digital academy which in 2019 passed the milestone of 1000 employees trained in the digital way of working. Across our organisation we are focusing on enhancing capabilities and ensuring every project possible is benefitting from appropriate digital tools, including 3D modelling and parametric design. We are also investigating where we can automate processes and ways of working further to generate the data to drive enhancements in our services for clients. A good example is our use of iReport which replaces physical reports with visual, dynamic information and data presented on a digital media platform. It enables clients and stakeholders to navigate information in their own way, using a range of tools to drive faster and clearer understanding. It won the 2019 IEMA Sustainability Impact Awards. 

A great example of a digital engineering project is the   creation of the design for the new Feyenoord soccer stadium in the Netherlands, which is planned to be built. The use of a parametric model and an interactive 3D model, supported by BIM, enabled a rapid design that could be optimised quickly, for instance for creating optimal sightlines for each individual seat in the stadium. Another great example is the digital sand engine for Bacton Energy that we delivered in the United Kingdom. With a fully automated process for data gathering and processing, an initial digital twin was created for the sand placement. This helps the client intervene in beach erosion.

Excelling in our operations

We regularly evaluate our strategy in relation to progress on efficiency. In 2019, we identified no need to refine our strategy but there was a need to streamline and accelerate progress towards our ambitions. To that end, project excellence remains a strong focus across our business. In June a new Director Project Excellence was appointed, with a focus on project management to continuously improve efficient service delivery to clients. Initiatives introduced in 2018, including Project Health Check and Drive2Win, are streamlined further to support project success and manage risks. Furthermore, we are centralising our recruitment activities to focus expertise and quality throughout the recruitment process.

Quality Management

As a global organisation, we ensure we deliver products and services to our clients according to standard working practices wherever we are working in the world. This is achieved with our global Integrated Management System, which was updated in 2019 to reflect and guide our digital ways of working. It is certified against globally-accepted  international  standards (ISO 9001, ISO 14001 and ISO 45001) and also covers integrity, business continuity, knowledge management, information security and our business principles. To ensure it continues to comply with global standards, QHSE audits were undertaken in 2019. Internal audits were conducted in all our Business Lines and offices by Corporate QHSE. DNV GL conducted external audits in the following countries: the Netherlands, South Africa, Oman and the United Kingdom. As a result of these audits, our ISO 9001:2015 (quality) and ISO 14001:2015 (environment) certificates were renewed. In addition, we obtained the ISO 450001 certificate for the first time (replacing OHSAS 18001). All three certificates are valid until September 2022.

Integrity highlights

We have been a partner of the UN Global Compact (UNGC) for more than a decade, supporting the 10 UNGC principles on human rights, labour, environment and anti-corruption which are integrated in our Global Code of Business Principles. We actively show our commitment to these principles in our tenders and offers and share our principles on integrity and compliance with suppliers and sub-contractors through e-learning. 

We have a zero-tolerance approach to bribery and corruption and aim to meet and surpass international best practice standards in anti-corruption compliance and business ethics. Our integrity policy is embedded throughout the company and we have held the ETHIC Intelligence Anti-Corruption Certificate since 2010. In 2019, ETHIC Intelligence audited our Integrity Management System again and concluded that it is robust and ensures compliant behaviour in our daily business. 

There were no major integrity incidents during 2019 but 134 issues and concerns were reported. It is higher than in 2018 (98) and reflects increased transparency, awareness and openness across our business in all regions. Characteristics of the reports included: unwelcome workplace behaviour; financial inaccuracies; working in controversial countries; and involvement in publicly disputed projects (for example placement of windmills, working on military projects). All issues were investigated, discussed when appropriate and concerns were addressed to mitigate risks. Several requests for advice were received about potential controversies, perceived conflicts of interest and third-party due diligence. Improvements to our way of working in respect of third-party due diligence will be further implemented in 2020. 

There were no allegations against the company or its management for bribery and corruption, nor investigations on this by any authority in 2019. 

We introduced a special integrity programme for new employees in 2019 and launched an internal campaign to focus awareness on equality, diversity and inclusion. The campaign will continue in 2020 and include controversiality risk in projects and partnering. A new Compliance Academy with a broad range of relevant learning topics will be launched in 2020. It will also include a new e-learning for our Global Code of Business Principles. 

Integrity is closely integrated with sustainable business practices, increased enforcement and accountability for a clean supply chain. In 2020, we will further enforce our responsible and sustainable business.

Sustainable Management

The challenge of a growing world population has consequences for towns and cities, particularly in demand for clean drinking water, water security and safety, as well as increasing pressure on traffic and transport. Industry too is facing issues around resource availability, energy and waste. Meanwhile, the impact of a changing climate is becoming increasingly visible and there is growing global demand for action from governments, companies and individuals. We are responding to these challenges through our mission to help build a better, more efficient and sustainable society using a combination of physical solutions, smart brains and digital technology. Key to our strategy is the desire to focus our impact in areas that we master and actively influence and, through that impact, contribute to specific UN Sustainable Development Goals (SDGs). These goals address the world’s most pressing issues and explicitly call on businesses to contribute with other stakeholders, which is exactly what we mean by Enhancing Society Together. We focus on where we can actually make a difference, connecting products and services key to our strategy to SDGs where we have scalable solutions which create impact. Together with our clients and partners we aim to contribute to the following SDGs: SDG4, SDG6, SDG7, SDG8, SDG9, SDG11, SDG12, SDG13 and SDG17. We share our progress via our Responsible Sustainable Business (RSB) Update 2019.

Adding value through our projects

Our biggest contribution to inclusive sustainable development comes from integrating new ideas, innovations, technology and sustainability into our projects. We  try to motivate our clients to make sustainable choices, to embed Enhancing Society Together and to contribute to the SDGs in our daily practice by using our 4 Questions to connect and align with them:

1. Does the output meet the requirements of most stakeholders involved?

2. Does the output serve added value for the client and society as a whole?

3. Is the result lasting, thus is it future proof?

4. Can we meet the client’s demand while minimising the use of natural resources and energy?

These questions guide our conversations with clients and partners to determine our added value for society, whether it is in our own operations or through our projects. During 2019, all these 4 Questions were actively used in 74% of our key projects. 

Two of our innovations in flood defence technology were used for the first time in the United Kingdom in 2019 and contribute to SDG11 and SDG13. One of these provides stability to the coastline and minimises wave run up using an alternative to conventional rock armour. It involves less construction material, lower costs and a reduced carbon footprint. The other is a sandscaping scheme in an area which has suffered severe coastal erosion which threatens an important gas terminal and nearby villages. The solution works with natural processes to halt erosion and actively restore beaches and has involved the deposit of 1.8 million cubic metres of sand. In Bosnia and Herzegovina we completed a sewerage project which connects 15,000 residents to proper sanitation. The 35km of pipelines will make a huge contribution to domestic sanitation and reduce the threat of contamination of the city’s drinking water resources. It supports SDG6.

In Bangladesh, we have been selected to masterplan a greenfield deep-sea port which will help the country achieve its growth ambitions, creating economic growth and more jobs, supporting SDG9. The latest Smart Port thinking will be incorporated to drive efficiency and high performance. The largest bicycle parking facility in the world opened in the Netherlands in 2019 offering space for 12,500 bicycles belonging to travellers to and from Utrecht Central, the largest transport hub in the Netherlands. We provided the integrated design and advised on efficient, safe routes in and around the facility. It supports SDG11. 

Three projects involved with sustainable energy production and use in the Netherlands provide examples of our contribution to SDG7 and SDG11. All buildings in the country must be gas free by 2050 to support the government’s climate change commitment. This is a major challenge impacting every residential and commercial building which currently uses gas to heat properties and water. In 2019, we assisted a town near Rotterdam in developing a route map to become natural gas free. As a first stage, we carried out a Heat Transition Agenda for Capelle aan den IJssel, looking at where to start and what is required, as well as available alternative heating sources. In another project, this time aligned with the energy agenda of the municipality of Delft, we are designing the first energy neutral station in the Netherlands: Station Delft Campus. The station will function on energy generated on site via a platform cover of solar panels delivering a CO2 reduction of 105,000 kg per year. In a project for a new art depot, our smart, energy- efficient installations will reduce consumption by up to 40%. The depot will provide access to the entire art collection of the Boijmans Van Beuningen Museum and space for visitors to watch conservation and restoration in action, as well as a meeting place, restaurant and roof garden. The climate system we designed uses about seven times less air than a standard climate system for art storage, saving lots of energy in the process. Other energy saving-measures include LED  lighting in all rooms and smart switches and sensors to turn off all lighting and power when no one is present. Energy is generated as sustainably as possible with solar panels on the roof and heat-cold storage in the soil. 

Please refer to our RSB Update 2019 for many further examples of our projects bringing tangible positive impact for society.

Contributing through our operations

Our own operations form the second area of our impact, and here too activities are mainly linked to relevant SDGs. We are committed to reduce carbon emissions across our organisation to combat climate change (SDG13). The key indicator we use is our carbon footprint. This covers the CO2 equivalent greenhouse gas emissions directly caused by our operations and emissions related to energy and paper consumption in our offices and business travel. 

Our footprint is based on an international corporate responsibility data collection structure and, in 2019, the data covered 85% of our staff (the Netherlands, United Kingdom, Indonesia, Poland   and India). A weighted average is applied for remaining staff. The data is collected by a team of local staff appointed in participating countries who report annually to our corporate data-manager. Their report is based on measurements (provided by meters or bills, internal registration systems or reports from partners or suppliers, such as travel  agencies). Data definitions and the procedure  on how to deal with missing data are standardised. If data is not available in time, the previous year’s data for that item and period  is reported (temporary estimate). In the next quarter, actual figures are provided to replace the estimate. Data reports are screened for accuracy and completeness by one local data provider and by a team of corporate staff. Inconsistencies are reviewed with and by local staff for explanation or correction. This leads to continuous improvement of our data and an increased understanding of our actual impact for local and corporate staff.

 Sustainable offices

We have been working on a wide range of sustainable initiatives in 2019 and developed an office accommodation policy which incorporates ambitions to maximise sustainable possibilities for buildings, uses and control. It includes five key policy statements, such as climate neutral energy use, circular materials and waste recycling. We aim for our buildings to be CO2 neutral by 2030 at the latest and to support at least one regional SDG.

 Sustainable mobility

Our focus on sustainable mobility is a key route to reducing carbon emissions and we are also reducing the need for travel by providing a virtual working environment enabling employees to work and collaborate independently from a physical location. When travel is necessary, we encourage employees to do so in a more sustainable way to reduce emissions/km. In 2019 we increased our electric car fleet by 230% compared to 2018, taking our total number to 285. We are well under way in achieving our goal of a 100% electric lease fleet in the Netherlands by the end of 2021. Two offices in the Netherlands are participating in an electric car sharing app and we continue to encourage the use of public transport and company e-bikes. 

CO2-Performance Ladder Level 5 certification

In the Netherlands, we successfully renewed our CO-Performance Ladder Level 5 certification (the highest level). The scheme stimulates CO2 reduction in our projects and operations by implementing a management system based on insight, reduction, transparency and participation.

Objectives and results

Our objectives and achievements with regard to reducing our carbon footprint over the past three years appear below.

Longer term, our ambition is to reduce our CO2 emissions* by the following amount:

* Reduction in tonnes CO2 per employee compared to base year 2016
** Feasibility of targets to be reviewed annually and adjusted if necessary.

Measurement and calculation of all material topics

We undertake a materiality analysis to identify, understand and balance the most important topics for our stakeholders. By relating them to the decisions and actions we take, we continuously improve as an organisation. We undertook our first materiality analysis in 2014 which has since been   used as a baseline. It is checked and refined each year. The analysis provides a shortlist of material topics, obtained from prioritising a longlist provided by GRI principles, studying our business strategy, internal input and stakeholder engagement. The priorities are:

1. Economic/financial performance

2. Integrity and ethical performance

3. Quality and sustainability in our products and services

4. Employability

5. Health and safety

Shifts in our business strategy towards increasing digitalisation and societal trends such as climate change have raised the priority of emission reduction, security and privacy from medium to high. Human rights assessment, anti-competitive behavior and environmental compliance have been raised from low to medium priority.

 Evaluating the impact of our CSR strategy on efficiency

We evaluated our CSR strategy and the impact it has on our efficiency through our employee and client engagement survey conducted by an external research agency in 2019. In a trend that has changed dramatically since our previous survey in 2016, the survey identified that sustainability is becoming increasingly important for our clients. Three key elements were highlighted:

• Customers are seeking to minimise negative effects of a project on the environment;

• They want to minimise use of scarce resources, particularly to: re-use materials and minimise use of fossil fuels during the building phase; use energy efficiently in buildings,

• They are adapting to the energy transition, moving to the use of renewable energy sources.

These results emphasise the importance of our mission to Enhance Society Together for our business. The survey indicated that commitment of employees to enhance society has significantly increased (compared to 2016) and more guidance to actively contribute on a daily basis is requested. For this reason, we have identified a need to make the ambition even more concrete in 2020.

Our Global Code of Business Principles

As an international organisation, we operate in a variety of cultural, social and business environments. Within all these, we conduct our business according to a universal set of principles as we believe that society can only be served when all stakeholders act ethically and adhere to the 10 principles of the UN Global Compact. These principles are embedded in our daily business through our Code of Business Principles (see our Integrity Highlights above). This is the way we can create inclusive sustainable development and contribute to SDG8 (Good Jobs and Economic Growth).

 Equality, diversity and inclusion

We are committed to equal opportunities and are proud of our increasingly diverse workforce. This diversity and a culture focused on inclusion offers economic and social added value for our business. Furthermore, diversity and inclusion play an important role in innovation where diversity of thought helps generate new and different ideas and approaches. 

Adding value to local communities

Across our organisation, we are actively involved in initiatives to benefit the communities within which we work. In the Netherlands, we have developed Gro Together which we launched in 2018. The initiative involves listening to the hopes and concerns of residents across Groningen to help meet their needs and contribute to a vibrant and liveable province. In 2019, we started to work on common themes that came from these  public  discussions, including bicycle parking problems in the city and quality of life in the surrounding areas. Graduate research into how local people would like to see the budget of the Groningen National Programme distributed is under way and three projects have been launched aligned with liveability. Another community activity, this time in Utrecht was participation in a station clean-up which collected  142kg of rubbish. 

We are closely involved with the educational  community  across the Netherlands and, for example, provided a case study relating to resilience to water and climate change risks for the 4TU Challenge Day. We provided similar input for an event at the University of Groningen. In 2019, we partnered with the Joint Interdisciplinary Project of TU Delft in which two student teams over a 10-week period designed a digital service which is enhancing resilience and supporting mitigation of business risks and reduction of impacts caused by climate- and weather-related hazards. We are involved with an international research project at Wageningen University which is exploring with students the effect of social  and environmental impact assessments. It is focusing on how recommended measures are implemented and whether they are successful. We are also involved with discussions on education programmes and profiles of graduating civil engineering students and their match with business needs. 

In the United Kingdom during 2019, offices have run a wide  range of fund-raising activities and community initiatives  including collecting contributions for food banks and providing Christmas hampers for young adults leaving the care system. We supported three maritime roadshows helping to encourage girls in disadvantaged areas to consider Science, Technology, Engineering, and Mathematics (STEM) careers and maritime engineering. In Vietnam, a team has set up a Going Green initiative to contribute   to improving the country’s future across four themes: carbon footprint, energy consumption, waste, and healthy minds and bodies. In December, 200 trees were planted outside Ho Chi Minh City – one for each employee. In South Africa, our Young Royal HaskoningDHV colleagues donated refurbished laptops to the Qhakaza Girl Initiative which helps develop coding skills and data literacy among young women aged between 12 and 21 to promote their career development. Also, in South Africa, at the government’s request we have been assisting with professional development and registration of their engineering staff. By exploring joint venture opportunities, we are helping small and medium sized enterprises (SMEs) access larger projects and, through this, gain exposure to international best practice. 

Our partnerships

Our partnership (SDG17) strategy focuses on influencing policy frameworks and cross-industry transformation. Further information appears in Our Company.

FINANCIAL PERFORMANCE 2019

The financial results of 2019 show an organic revenue growth of 1.3% (2018: 3.1%). The operating margin remained at 4.2%, while the order portfolio increased to €314 million (2018: €306 million) in 2019. The net result decreased to €9.2 million (2018: €12.7 million). 

Our operational result (EBITA recurring) ended at €26.9 million (2018: €25.9 million), which included significant operational expenditures in relation to our strategy Strong22. The results are strongly driven by the performance of the Maritime & Aviation Business Line. Due to the challenging market situation in South Africa our business in Southern Africa declined and has been restructured. This impacted the net result negatively by € 11 million. Also a number of Asian countries had a negative impact on the result. Excluding subcontractors, organic added value growth was 2.3% (2018: 1.5%).

Our continuous focus on project management yielded much higher project results than last year. Although Sales Added  Value was good and the order portfolio increased, this did not result in a higher order-related utilisation rate. Compared to last year the utilisation rate slightly declined, partially caused by a firm focus on innovation and development. 

In order to achieve our Strong22 ambition, we undertook a number of investments. We bought the United Kingdom based Lanner Group as well as Ambiental. In addition, we acquired a minority stake in Singapore-based Hydroinformatics Institute. Further information appears in Our Company.

The results yielded a positive free cash flow in 2019 of €1.0 million (2018: €17.4 million). The free cash flow is lower than last year due to investments (Lanner, Ambiental, H2I) Trade working capital (work in progress, trade debtors and trade payables) showed a normal seasonal pattern throughout the year and was below last year’s level for the full year. The days sales outstanding (DSO) decreased to 79 days at the end of 2019 (2018: 86 days). Our financial position remains healthy, with an equity ratio of 48% (2018: 48%) and a net cash position at the end of the year. We operate well within our bank covenants.

OUR PEOPLE

It is our nearly 6,000 colleagues who are delivering our   strategic transformation and, in order to do so, they are continuously learning and developing. We improve our capabilities through recruitment and development. To attract talent, we launched an 18-month traineeship for graduates to accelerate technical and digital skills. It includes one-to-one mentor support, on-the-job training, presentations, seminars and networking events to share knowledge and experience. Our Digital Academy offered online courses and classroom training to further develop the digital skills of staff of all ages. We were proud to receive accreditation for the Academy by the Royal Institute of Engineers (KIVI) in the Netherlands and recognition in South Africa.

In 2019 we introduced a global online onboarding programme to provide all new employees with information about our company including our strategy, business principles, our way of working and many other topics. In the Netherlands we organised monthly Royal Start induction day for new employees to meet colleagues who recently joined the company which involved interactive games to understand our ways of working.

Engagement and enthusiasm

Employee engagement at Royal HaskoningDHV has increased significantly over the past three years. Results from engagement research among employees in 2019 indicated the following:

• 85% of our employees say they enjoy their work;

• Employee satisfaction is above benchmark at 80% and has increased (2016: 71%);

• 76% of our employees feel proud working for Royal HaskoningDHV;

• 81% of our employees have confidence in direct management – an increase over recent years and significantly better than the benchmark;

• 74% of employees feel they can freely express thoughts.

HEALTH & SAFETY

We are committed to the highest standards of health and safety across our operations for staff, visitors and partners. Our vision and policies are part of our Management System. They are implemented through our processes and procedures to ensure we maintain and continuously improve a healthy and safe working environment. Following  successful  audits in various countries, we achieved our objective of the new ISO45001 certificate for Occupational Health and Safety, making us one of the first international engineering consultancy firms  to obtain this certification. 

Other objectives for 2019 were zero fatalities and a target of at least 0.18 for lost time injuries. During the year, no fatal accidents occurred among our employees and 136 accident and incident reports were submitted. From these reports, 96 related to accidents and incidents relating to employees. In total 7 accidents resulting in at least one day off work were recorded  in 2019 (3 in 2018). Two of these occurred at an office location, three at out-of-office locations and two were traffic related. There were 89 other reportable cases.

• Lost time injury frequency (LTIF) per 200,000 workable hours in 2019 was 0.17. The figure has increased compared to 2018 (0.07) but is below the 0.18 target. This resulted from an increase in out-of-office and traffic related accidents in 2019.

• Total recordable cases frequency (TRCF) per 200,000 workable hours over 2019 was 2.39. This increased compared to 2018 (1.92) and provides a good indication that we take health and safety seriously, reporting not only accidents but incidents too.

CONTINUED AND INCREASED FOCUS ON INFORMATION AND CYBER SECURITY

We are committed to protect our clients' and our company’s information from security threats and to comply with data privacy regulations. To protect information, we have implemented an Information Security Management System (ISMS) conforming with ISO27001 and received ISO27001 certification in December 2019. 

We want to work and provide digital cloud services in a world of open communication via the Internet, mobile working and mobile devices, which means we need to protect our data and privacy. We are constantly searching for weaknesses which could potentially provide unwanted access to our systems and data. We evaluate countermeasures to reduce risk and continuously improve our security measures to keep up with data privacy regulations, and to increase protection against cyber threats. 

Information security is increasingly included within clients’ requirements and we continue to be able to meet their needs by selecting the optimal mix of solutions. Therefore, the ISMS also supports our objective to ensure competitive advantage by providing secure digital services to our users and customers.

RISK MANAGEMENT

Corporate risks

Every year, management identifies the most important corporate risks, which are documented in the Group Risk Log. Each of the most important risks have been allocated to our transformation programme and the programme leads are accountable for mitigating the risk(s). Follow-up is monitored and reported to management quarterly. 

To reduce the cost of failure, which in our industry is to a large extend related to flaws in project management we have embarked on in depth project management  training  and have designed very robust project management tools. This, in combination with the Project Health Check, has reduced project losses. We see further opportunities in strengthening our project management and business development  capabilities. 

To initiate projects in countries with high business risks or other risks (like employees’ safety), approval is needed from the Business Line Director, Executive Board member or Risk Assessment Board (depending on the nature and gravity of the risk assessed). In addition, best practices are shared with project managers to improve cultural awareness. The core principles of UN Global Compact in the areas of human rights, labour, environment and integrity are incorporated in our Global Business Principles, Global Code of Conduct and Integrity Management System. We continue to review what is happening in the world around us and discuss our response. In 2019, discussions included risks in relation to Brexit, which were perceived to be limited but requires monitoring. Countries going through political uncertainty are also assessed on a regular basis to evaluate what the related risks are and what our policy should be.

Disruptive technologies and other trends will have a significant impact on our knowledge-intensive business. Royal HaskoningDHV is monitoring these developments and is actively engaging with partners  on  innovation and digitalisation. As part of our strategy Strong22, Royal HaskoningDHV has embraced the digital way of working and digital services.

Operational risks

Projects

Project risk management procedures are integrated in our Management System to ensure consistency throughout the organisation. Control measures include the authorisation matrix and the risk and approval matrix defining who can approve commitments and transactions. Project proposals  with the highest risk for the company are reviewed by the Risk Assessment Board (consisting of Executive Board, Director Project Excellence, Corporate Director Legal and Risk Manager). 
Each prequalification and proposal undergo a risk assessment. Those with higher risks are analysed by our Risk Managers, advised by Controlling, Legal, HR, Tax and Treasury. Depending on the outcome of this assessment, the authority to approve such risks is defined in our risk and approval matrix. The Project Manager documents the result in a Risk Mitigation Plan which is updated throughout the project. The Drive2Win approach, guiding the Proposal Manager during the proposal preparation, has now been implemented. This should lead to a more efficient and effective consideration of risk mitigation and reward. 

The Project Health Check tool supports monthly project reviews with the goal of improving our project results. Based on the key variables of a project (including risk, which can change over time) projects are reviewed and discussed up to Executive Board level to support Project Managers taking the right actions. Finance and Project Excellence Managers are also involved in those reviews, each bringing their own expertise. In this way we ensure that client demands are met, adequate progress is made and risks are identified, sufficiently mitigated and reflected correctly in our accounting systems. 

Liabilities

Our liabilities are defined within each contract. Most of these will fall within our standard conditions for what we consider acceptable risk. If conditions do not comply, additional approvals are required. Legal counsel reviews and provides recommendations to limit liability when possible. In addition, we are covered to a significant level by Professional Indemnity Insurances. 

Liquidity

Two main controls help ensure sufficient funding is available  for our operations: control over our working capital (mainly work in progress positions and debtors) and securing our bank facilities. Before submitting a proposal, we assess the client’s ability to settle our invoices over the duration of the project and monitor our credit risk continuously during project execution.  In addition, for each proposal, a cash flow forecast must be prepared and we aim to negotiate a positive cumulative cash position during the project. We have agreed facilities with our banks where loan covenants are applicable. Our Corporate Treasury monitors that these are met.

Currency

Fluctuations in commonly traded currencies like USD and GBP and in less traded currencies represent a risk on part of our turnover. Our treasury policy aims to cover the currency risk as much as possible during execution of projects. Corporate Treasury monitors and advises on foreign currency exposures and the use of hedge instruments. 

Guarantees

A few clients require us to issue corporate guarantees for the execution of a project. It is our policy to limit the issue of these guarantees. For this reason, we manage our balance sheets to ensure solvency of our companies is enough to operate independently in the market. Royal HaskoningDHV has stringent procedures to review and approve bank guarantees and bonds (like advance payment guarantees and performance bonds) before they are issued. 

Pensions

In principle, Royal HaskoningDHV operates pension plans under defined contribution pension schemes. However, at HaskoningDHV UK Limited there is a closed defined benefit scheme. This scheme was closed to future accrual in 2005. The closed defined benefit members became deferred members. The Group does not and will not provide any guarantees to the United Kingdom defined benefit pension scheme. The defined benefit scheme deficit under Dutch GAAP as at 31 December 2019 is €24.8 million (2018: €20.8 million) with an associated deferred tax asset of €4.2 million.

OUTLOOK

We  expect further growth in 2020. Having invested heavily  in the transformation of our business over the past couple of years, it will be an important year for realising results, creating additional momentum for change across our organisation. We will continue to invest in the development of innovative technology and products as well as innovations and digital ways of working within our company and a continued search for strategic investments in companies that support our strategy and strengthen our portfolio.

The economic environments in our key countries are largely positive. Growth in the Dutch economy is expected to be slightly lower than in 2019, however we believe Royal HaskoningDHV can perform above these expectations. We  are involved at various levels with most major infrastructure projects under way. Uncertainties connected  with  nitrogen as well as PFAS pollution discussions remain. We will monitor developments and act and assist our clients appropriately. In the United Kingdom significant infrastructure developments are planned. Following the elections and with questions over Brexit resolved, we also expect private as well as public investments to pick up. South Africa remains a challenging market but policy reforms are improving the environment for business, sparking domestic and foreign investment in the private sector. Having restructured to focus on servicing this sector, we aim for a better result there in 2020. Market growth across the Asia-Pacific region continues at 5-6%. In Indonesia, we expect to see more transparency, stability and investment in 2020. While local competition is increasing, there are good opportunities for our business in segments where we are strongly differentiated, like renewables, smart water and high- end consultancy.

As mentioned we operate in different economic environments. Although our expectations about the development of these economic environments in general are positive we will continuously monitor the market conditions and if required adjust our staff capacity accordingly.

Across markets globally, there are areas of high growth which we expect to service. For example, renewables are growing fast in industrial markets and the investment in off-shore wind is  an area where we expect to further strengthen our position. We are consolidating our position in Fast moving consumer goods (FMCG) and food & beverage . We see considerable further potential across the water industry, with our Nereda® technology and smart solutions. We are introducing smart solutions across markets including infrastructure, industry, airports and ports. This is opening up significant growth opportunities which, while they may be limited in absolute numbers in 2020, are positioning our business for significant expansion in future years. We will reap the benefits of investments in software products including Aquasuite®, Flowtack and others which have proven their commercial viability and will be scaled further in 2020. 

Transformation within our business will continue in the year ahead with a focus on becoming more data driven in our ways of working to increase productivity and generate opportunities for new services. We are building a culture of continuous learning to support a high-performance organisation through our leadership, recruitment and skills development. 

Our mission continues to be our guiding principle. The 4 questions (see above) asked to stakeholders in our projects make sure we keep translating our mission through our daily activities to create sustainable solutions for customers and stakeholders around the services we deliver. Our mission is part of the reason our people and clients choose to work with us and why parties collaborate with us. It is a critical element in our company DNA and we will continue to take pride in and share our success in enhancing society together. 

Amersfoort, Netherlands
March 6, 2020

 EXECUTIVE BOARD

E. Oostwegel (CEO)
J. de Wit (CFO)