Stockmann.com

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Risk management

The aim of risk management is to safeguard the Group’s earnings trend and ensure disturbance free business operations by implementing risk management cost-effectively and systematically in the divisions. To achieve the goals the risk management at Stockmann is organized such that

• it is part of normal business operations and management.
• it is a process of identifying, assessing and managing business risks that can prevent or jeopardize the achievement of business goals.
• it is supported by internal control systems (guidelines, routines and procedures). Risk management principles are defined separately for specific areas, including the following: IT and data security, financial operations, environmental affairs, fraud and abuse, security and insurance policies.

Risk classification

All factors that may jeopardize or prevent the Group or its divisions from achieving the strategic goals they have set constitute business risks. Stockmann’s business risks are classified into three risk areas:

• Business environment risks, meaning risk factors that are external to the company and may significantly affect the company’s latitude of operations and profitability if they materialize. These kinds of risk factors encompass fundamental and unforeseen changes in market trends, disasters and catastrophes, and country risk for Russia.
• Operating risks, meaning internal risks associated with operations which may, if they materialize, lead to interruption of business, inefficiency and unprofitability. These risk factors include risks related, for example, to personnel, fraud and abuse, IT and data security risks as well as risks associated with information used in decision-making.
• Financial risks, whose influence will be reflected in the Group’s profits, balance sheet and liquidity if they materialize.

Allocating responsibilities within risk management

Risk management is part of the Stockmann Group’s normal business operations. The Board of Directors sees to the due and comprehensive supervision of accounting and financial management according to the Finnish Companies Act. The Board also confirms the company’s long-term strategies and financial goals.

In accordance with the recommendation on the Corporate Governance for listed companies, the Board has confirmed the company’s risk management principles.

The chief executive officer sees to it, according to the Finnish Companies Act, that the company’s accounts are kept according to law and that the management of funds is arranged in a reliable manner.

During the strategy process, the Group’s Management Committee makes an estimate of business risks that may jeopardize or prevent the achievement of strategic goals. At the same time it evaluates the adequacy of risk management measures. The management committees of the divisions are responsible for drawing up strategic and financial plans for their own divisions. Formulating a strategy involves analyzing business risks and assessing the risk management procedures. Business risks are also analysed outside the strategy process, in particular in connection with important projects and investments.

The Group has a Risk Management Steering Group whose task is to support the divisions in identifying and managing risks that may jeopardize or prevent the achievement of Stockmann’s strategic goals. The Steering Group, comprising the head of the Group’s Internal Audit, the Group’s director of legal affairs, and the head of Group Consolidation, reports on its observations and recommendations to the company’s Management Committee.

Business risks are managed by taking out voluntary insurance policies in accordance with the confirmed principles of providing insurance cover. The Stockmann Group’s insurance function is handled centrally by the company’s director of legal affairs, who is responsible for seeing to it that the principles of providing insurance cover are observed at all Group units. In addition, the insurance company carries out regular insurance inspections of the insured items and sites in order to ascertain that the company has appropriate insurance cover. Responsibility for statutory personal insurance has been assigned to the Group’s personnel administration unit.

Risk management reporting

The divisions report on business risks and their management

• annually in connection with Stockmann’s strategy process
  and
• as part of decision-making on important projects and investments to the Group’s Management Committee, which reports on business risks to the Board of Directors.