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Risk Management

The Company’s risk management is based on the Company’s values as well as strategic and financial objectives. Risk management goal is supporting the achievement of the objectives specified in the Company’s strategy as well as to ensure the financial development of the Company and the continuity of its business.

Risk management’s task is to identify, assess and monitor business-related risks which may influence the achievement of the Company’s strategic and financial goals or continuity of its business. Decisions on the necessary measures to anticipate risks and react to observed risks are made on the basis of this information.

Risk management is a part of the Company’s regular daily business, and it is also included in the management system. Risk management is controlled by the risk management policy approved by the Board.

A risk is any event that may prevent the Company from reaching its objectives or that threatens the continuity of business. On the other hand, a risk may also be a positive event, in which case the risk is treated as an opportunity. Each risk is assessed on the basis of its impact and probability. The Company’s methods of risk management include avoiding, mitigating and transferring risks. Risks can also be managed by controlling and minimising their impact.

RISK MANAGEMENT PROCESS
The Company’s risk management policy seeks to maintain and further develop a practical and comprehensive system for the management and reporting of risks. The risk management process includes systematic surveying of function- and unitspecific risks, their assessment and comparing the risks with the Company risk management plan. Risk management is systematically implemented and monitored as part of the daily business. The Company aims at promoting its risk management by increasing awareness of the significance of risk management and supporting shared risk management projects of the functions.

RISK CLASSIFICATION
The key risks to the Company’s business are divided into four categories: strategic and operative risks as well as financing risks and risks of injury or damage.

STRATEGIC RISKS
The term “strategic risk” refers to a risk related to the nature of the Company’s business, its selected strategy and implementation of the strategy. Such risks may refer to the competitive situation, markets or market environment, legislation and other legal norms, for example. A strategic risk may also be a major investment or a strategic choice related to the business. If realised, a strategic risk may clearly deteriorate the preconditions for the Company’s business.

Market and business environment
Global economic crisis and general economic fluctuations affect the demand for the Company’s products and its financial position. The fact that the Company does business in more than forty countries balances out the fluctuation risks. Furthermore, the Company aims to maintain its business so that it is flexible and adaptable to changes in order to be ready to quickly adapt its business to the prevailing market situation.

The competitive situation and changing requirements of the markets may influence the demand for and profitability of the Company’s products. The Company invests in understanding the needs of its customers, and it carefully studies the demands posed by different markets on products in order to ensure that the products comply with the specific requirements of each region and are competitive. The Company has an extensive network of stakeholders. Stakeholder risks are mitigated by continuously monitoring the network and engaging in good cooperation. The price development of strategically important raw materials and their availability in the global market influence the profitability of the Company’s products. Risks related to the price development and availability of raw materials are mitigated by surveying alternative materials and developing acquisition channels.

Legislation and the environment
Changes to the political environment, legislation influencing the Company’s business and phenomena connected to climate change may clearly influence the Company’s business in different market areas. In cooperation with its subsidiaries and regional partners, the Company actively monitors the requirements posed by the markets on products, services and the business as a whole—such as general business and import legislation as well as product compliance and environmental requirements. Furthermore, the Company actively communicates with its stakeholders, influences future solutions and sees such solutions as new opportunities.

Products and technology
The Company’s product and technology risks refer to technological choices and R&D. These risks are mitigated by staying close to customers and other stakeholders in order to ensure that product technology is developed in the correct manner. Furthermore, the Company aims to actively cooperate with universities, institutions of higher education and research establishments as well as participate in global R&D projects. Developed technologies and products are protected by means of intellectual property rights. The Company is also aware of the industrial rights of its competitors and respects them in the conduct of its own business.

OPERATIVE RISKS
The term “operative risk” refers to a risk related to the Company’s internal processes, personnel, business network and systems. If realised, operative risks may deteriorate the Company’s earnings, effectiveness and profitability.

Organisation and management
Risks related to the Company’s organisation and management include risks connected to, for example, the availability of workforce, labour market disturbances and management of key competence. The Company’s personnel strategy has a key role in managing risks related to the organisation and management. The commitment of key employees in the Company is improved by means of an incentive scheme. Investments in recruiting are made in order to ensure access to the correct type of workforce. The Company’s image as an employer is developed by means of appropriate communications and cooperation with various educational establishments and other stakeholders.

Information and IT
The Company’s information and IT risks include, for example, the risk of trade secrets leaking out of the Company as well as risks related to the functionality, security and safety of IT systems. The Company complies with an information security policy to manage these risks, with the aim of ensuring that all preconditions for the functionality of the systems and ensuring their safety exist. Information leaks are proactively prevented by means of all necessary measures.

Supplier network
The Company persistently develops its supplier network. Material price and availability risks are also related to the supplier network. The Company aims to ensure a competitive material price level by studying alternative procurement channels and signing long-term agreements. In order to achieve cost-efficient solutions, the Company invests in close R&D cooperation with its supplier network.

Whenever necessary, the Company utilises a policy of two suppliers to manage material availability risks. The business environment is stabilised by means of long-term supplier agreements and regular supplier audits in compliance with the auditing programme. The Company aims to create a supply chain by which the Company does business directly with manufacturers in order to retain a real-time communications channel. A supply chain management tool is utilised in monitoring the supplier network and optimising batch sizes.

Production and processes
The Company’s business requires comprehensive process management. What is important for a cost-efficient business is maintaining and improving processes. The Company’s quality management system is continuously developed in order to maintain its processes as functional. Functionality of the system is assessed by utilising results obtained from process management as well as ISO 9001 certification by a third party.

Production process disturbances or disruptions may hamper the business. Preparations for major disturbances are made by maintaining substitute manufacturing methods and equipment. Furthermore, the opportunity to manufacture cooperation with key partners is maintained.

FINANCING RISKS
The Company is exposed to several financing risks in the normal course of its business. The Company’s financing risk management system aims to protect the Group’s performance, cash flows, shareholders’ equity and liquidity from unfavourable financing market fluctuations. Financing risk management is handled in a centralised manner by the Company Financing Unit. The Board ratifies the Company financing risk management policy, and the Company CFO is in charge of its practical implementation in cooperation with the Financing Unit.

The Company’s financing risks include currency, interest, credit and liquidity risks as well as capital management risks. For more information on financing risk management, please see Note 30 to the consolidated financial statements.

RISKS OF INJURY OR DAMAGE
The main focus in risk of injury or damage mitigation lies in identifying and preventing risks. Identified risks of injury or damage include, for example, occupational health and safety risks, environmental risks and risks of property damage. Risks of injury or damage are managed by means of an extensive insurance scheme. Damage is proactively prevented by applying a safety policy and safety guidelines as well as ensuring that working methods and tools are safe. The Company quickly reacts to any dangers observed. All accidents and close call situations are recorded in a monitoring system, and the necessary measures to prevent dangers are implemented. The Company’s objective is an accident-free working environment. Risks of injury or damage are regularly assessed by means of internal audits. The entire personnel participate in identifying risks of injury or damage. 

RISK MANAGEMENT AND RESPONSIBILITIES

Board of Directors	Decides on risk management objectives and principles as well as ratifies the Company Risk Management Policy. The Board supervises the implementation of risk management.
President and CEO	Responsible for arranging risk management measures and presenting risk management issues to the Board.
CFO	Coordinates the risk management process, carries responsibility for reporting and presents risk management issues to the Management Team.
Management Team	Risk management is included in the strategy process. The Management Team participates in controlling the risk management process and naming the persons in charge. Each member of the Management Team is in charge of identifying risks in his or her business area and implementing risk management.
Regional directors	The subsidiaries independently implement their risk management in compliance with the Group’s risk management policy and guidelines.
All employees	Obligated to act in a manner required to prevent risks, follow the Company policies and report any observed risks to their supervisors.