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Managing Risk in MexicoHow to Maintain Profitable Operations through Risk

Management

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Celestica In Mexico

Benefits of Mexico Operations

• Proximity to US market

• Low cost of labour

• Low ship-to-market costs

• Close to our customers

• Monterrey is one of our mega-sites (5000+ employees)

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Celestica In Mexico

Challenges of Mexico Operations (Macro)

• “Failed State” issues regarding law, authority & enforcement

• Trans-national criminal activities (cartel operations)

• Local gang activity

• Difficult to develop liaison with local or State level officials

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Celestica In Mexico

Challenges of Mexico Operations (Site Level)

• Providing positive, supportive work environment

• Building loyalty and trust among all levels of staff

• Retaining employees in a ‘contract’ environment

• Knowing who we can trust outside our walls

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Celestica In Mexico

Business Conduct Guidelines & Guiding Principles

• In 2010: We expanded the scope of our training program to include all full-time employees

• On an annual basis, employees certify to BCG training

• Our BCG includes a resources section for reporting (anonymous, by phone, online, through management, etc.)

• The centralized reporting program has been strengthened so that corporate office receives all allegations or issues, nothing can be ‘buried’, or perceived to be buried at the site level

• We demand immediate and measured investigation and follow-up on all allegations. This action is crucial to demonstrate commitment. (substantiation is essential)

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Celestica In Mexico

How we reduce loss / exposure

• Reduced physical security costs (over long term)

• Increase levels of guard training (more with less)

• Cash incentives for strong performance

• Smart physical security design to reduce likelihood of theft (must be part of the solution)

• Need to provide employees with options for strong behaviour and eliminate the ability for outside influence through design and business controls

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Celestica In Mexico

Going Forward

• Estimate that before holistic approach; total spend, including loss, was approx. $200k above today’s spend.

• Most of the current spend is proactive and we are hopeful that the development of greater employee engagement will allow us to further reduce exposure

• High risk environments are never easy and issues are always in flux

• Developing a proactive, soft program can reduce the reliance on traditional security programs

• Finding the right balance is a challenge worth pursuing for all the right reasons.