Raisio is an international company specialised in foods and feeds. Changes in the Group's operations and operating environment may expose the company to significant risks. Risk management is part of Raisio's day-to-day operations and decision-making and it aims to prevent adverse effects on the business or financial position and hence the value of the company.
Raisio's risk management policy defines the targets, principles and responsibilities of risk management. The target of risk management is to identify risks and to secure the continuity of Raisio's operations, safety of products and operations, personnel and assets and to prevent events affecting negatively the shareholder value.
Raisio's risk management emphasising preventive measures
Raisio emphasises preventive measures in its risk management and strives to continuously improve the risk management in all of its aspects. In practice, the Divisions and service functions, such as financing, are responsible for identifying and surveying risks and report them to the Group's Management Team and Risk Management function. Risk Management function coordinates, develops and monitors risk management at the Group level. Possible findings of internal control and business risks are reported to the Board of Directors as part of monthly financial reporting.
Raisio Group's significant risks according to the spring 2016 assessment
Changes in the global economic situation or possibly increasing geopolitical tensions could affect Raisio's operating environment in many different ways. Various economic and political changes and particularly the UK's possible departure from the EU, the European refugee crisis and Russia's import restrictions on dairy products can have a wide range of effects on the competitive situation. However, Raisio expects the grocery market to remain relatively stable compared to other sectors, and the company continuously seeks to develop its competitiveness in all of its key markets.
As Raisio is an international Group, its operations are affected by legislation and other regulations, including taxation, of the countries in which it operates. Unforeseen changes in laws and regulations can result in significant changes in the operating environment, which could negatively affect Raisio's profitability. For example, possible health risk taxes on Raisio's products and raw materials used could affect product prices, demand and also supply. Raisio is actively following regulative discussion, informing and projects, and aims to take account of changes affecting its operations.
Changes in exchange rates may considerably affect Raisio's net sales and EBIT, directly and indirectly, as a significant part of the Group's net sales and EBIT comes from other than euro-currency countries. Raisio's exchange rate risks mainly consist of foreign currency cash flows and the translation of foreign Group companies' balance sheets and income statements into euros. Raisio's centralised Treasury function is responsible for the exchange rate risk management according to the Group's Risk Management Policy.
Raisio's Treasury function is also responsible for other financial risks and their management. Financial risks and their management are described in more detail in the Notes to the Financial Statements.
Raisio uses several agricultural-based raw materials in its operations, and any changes in their availability, quality or price expose the company to significant risks. Raisio aims to hedge against changes in prices and availability of raw materials through various agreements, derivatives, as well as by actively developing its production processes in such a way that raw materials can be modified and used more efficiently in the production processes.
The quality of products is of primary importance in the food and feed operations. Defective products or delivery difficulties can have significant effects on Raisio's customer relationships, reputation and profitability. To ensure the quality of various raw materials, packaging materials and equipment necessary in the production, Raisio seeks to manage the quality risk of products by actively training its personnel and by following a rigorous quality assurance process.
The food industry has become increasingly international, which has significantly increased competition and cost pressures. In addition, retailers have increased their launches of affordable private label brands. In the UK, retail chains have strongly decreased their product listings, which has resulted in tighter competition for shelf space. Raisio aims to meet the competition by enhancing its own operations and by investing in its brands and innovations.
Use of IT and information systems is strongly related to Raisio's business. Data security breach, misuse, malware, viruses and system malfunction are examples of possible IT application related risks. If these risks materialise, they may cause failure of different systems and interfere with Raisio's operational reliability, profitability and financial performance. Raisio seeks to minimise the realisation of information technology risks by training its personnel and by actively informing about possible risks and threats. At the system level, risks are reduced through continuous monitoring, preventive maintenance and know-how acquired from the company's partner network. In information security matters, Raisio strives to comply with the principles of continuous improvement.
In addition, Raisio may be subject to other risks not mentioned here.