Risk Management
The Group's risk management aims to ensure the continuity of business and the Group's capacity to operate under the circumstances of any risk scenarios which can be identified in advance. The targets and priorities of strategic risk management are defined by Revenio Group Corporation's Board of Directors.
1. Risk management responsibilities and roles
Implementation of risk management is under the responsibility of business area management teams and the Group's Management Group. These bodies ensure that sufficient risk identification, assessment, management and reporting procedures are included in the processes under their respective responsibilities.
Subsidiaries' business management teams locally organize risk management implementation methods, taking account of the subsidiary's size. For certain risk management areas where a centralized approach is appropriate, such as the management of insurance and financial risks, the parent company's Board of Directors makes the related decisions based on the President & CEO's proposal.
Risks and any changes therein are reported to Revenio Group Corporation's Board of Directors. The Board considers the key risks and their management and analyzes the functioning of risk management at least once a year.
Risk management is assessed by the Internal Audit function during internal audit procedures.
2. Risk management implementation
The business segments assess risks in preparing their annual plan. Risks and their management are considered by the business segments' management, and risk assessments are updated at least once a year. Separate risk analyses are made for sizeable projects, such as major customer projects.
3. Key risks and uncertainties
The Group’s risks are defined as strategic, operational, trade cycle, hazard and financial risks. In order to dimension and implement risk management measures, each risk under these categories is analyzed to estimate the probability and impact of their realization.
The Group's strategic risks include, for instance, the risk of changes in competition within the business, risks associated with maintaining the product offering's competitiveness and competitor-led strategic measures altering the market situation. Strategic risks are also associated with the successful management and development of key human resources and the management of the subcontractor and supplier network.
The Group’s strategic objective is also to pursue growth through acquisitions. The success of acquisitions affects the attainment of growth and profitability targets and includes a strategic risk. Failures either in acquisition or the ensuing integration measures may lead to a decline in the Group's competitiveness and profitability. Acquisitions may also change the Group’s risk profile.
Operational risks are associated with the retention and development of major customers and success in extending the customer base. A key risk in the Health Care segment, in particular, concerns factors pertaining to entry into new markets and the threat of competing products. Extending operations to new markets exposes the segment to new risks related to those markets, their regulation and authorities' decisions pertaining to health care. Project-based operations, mainly carried out in Systems and Technology segments, entail exposure to subcontractor and supplier risks in the management of demanding integrated solutions as well as to production-related risks arising from own operations.
The share of deferred tax assets under assets in the consolidated balance sheet is significant. Potential changes in business profitability and tax legislation could entail changes in the availability of deferred tax assets.
Hazard risks are covered by insurances. Property and business interruptions insurances provide protection against potential property and business interruption risks. The business pursued is covered by international liability insurances.
Financial risks can be further categorized under credit, interest-rate, liquidity and foreign exchange risks. Where necessary, proposals on the management of financial risks are considered by the company's Board of Directors. The company has a minor loan portfolio susceptible to interest-rate risk, which is partially interest-rate hedged. Foreign exchange risk is monitored in exposed foreign exchange positions. As a credit risk management measure, in March 2009 the Group decided to take out credit insurance covering all Group companies. Liquidity risks and the Group's liquidity are monitored using cash forecasts which are drawn up for forecast periods of approximately 3–6 months.
