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Srv Company / Investors / Corporate Governance / Risk management

Risk management

SRV engages in systematic risk management in order to help in recognising new opportunities and protect itself against factors that might hinder its business operations. The company improves the stability of its operations by identifying and reacting to strategic and operational risks in time. Risk management is part of SRV's management system. It supports the company's values, vision, strategy and the achievement of its earnings objectives.

Risk management strategy 
The objective of risk management is to ensure that controllable risks do not jeopardise SRV's operations. To this end, SRV ensures that it has a systematic and end-to-end approach to identifying and assessing risks as well as to carrying out the necessary risk management measures and reporting on operations.

Risk management responsibilities 
Overall responsibility for risk management rests with the company's Board of Directors and president and CEO. The company's Board of Directors approves the risk management strategy and policy, and assesses the framework for risk management covering the entire company. Line management is in charge of carrying out day-to-day risk management as well as for its management and supervision. The Group's risk management function supports the application of risk management principles and develops Group-wide ways of working.

Main risks 
SRV's operations involve both strategic and operational risks. The main risks are discussed below:

Strategic risks

Macroeconomy 
Changes in the economic cycle or in the operating environment of the Group's customers can have a material impact on SRV's operations and thereby also on its financial position and result of operations.

Construction operations hinge on companies' confidence in the general trend in the economy and consumers' confidence in their own finances. When the cyclical outlook weakens significantly, demand for housing and business premises declines. The prices and rents of business premises and the prices of housing might go into decline. The construction volume decreases and competition for projects heats up, increasing risks in the construction business.

Moreover, the availability and changes in the terms of financing have a direct impact on the property and housing market. When the market is poor, it is difficult to secure financing and its cost soars, especially in the case of higher-risk sites.

Central elements in managing cyclical risks at SRV are continuous anticipation of changes in the environment and market situation, systematic operational planning and monitoring, management of the priorities of various business areas and project models, prudent use of capital, a flexible organisation model and the ability to respond swiftly.

Profitability 
SRV improves operational profitability by stepping up the design and implementation of development projects that interest investors. Risk management is based on the careful analysis of projects, both in their development stage and when taking decisions on construction start-ups. The aim in allocating capital is to undertake short-term commitments as well as to line up users and owners before starting construction. The company maintains and hones its cost-effectiveness continuously. Operations are planned and scaled in line with the prevailing market conditions.

Growth 
SRV seeks long-term growth from emerging markets close to Finland. Operations are also expanded in Finland's growth centres. At the same time, the operations of the company's business areas are balanced out, which also serves to improve risk management.

The management of growth-related risks is constantly upgraded by deepening the company's expertise in the operations of its main customer groups, enlarging its reliable networks of local partners and standardising the supervision and reporting of operations. In addition, SRV is making a concerted effort to upgrade the expertise of its personnel, develop matrix functions and transfer expertise to new and growing business areas.

Operational risks

Resource management 
Among the Group's central competitive advantages are the long experience and solid expertise of its management and entire personnel. The most significant risks for the company's own organisation relate to retaining its present staff and obtaining new, skilled employees. The Group-wide achievement of these aims is promoted through a sound human resources policy that emphasises systematic training and a good working environment, active co-operation with schools and educational institutions as well as a positive and competitive employer image.

Other important resources for the company's operations include the special experts, designers, special contractors and material suppliers in the co-operation network that implements projects. SRV is always on the lookout for new reliable and skilled partners for its network. The company develops the network constantly.

Project management 
Projects often involve major technical and operational risks. These risks are managed with project plans, steering of the design and planning process, project-specific quality assurance plans and guiding and tracking implementation. SRV's subcontracting and implementation process is a smoothly functioning mechanism that includes a number of controls to ensure process and product quality. In the management of contractor processes, SRV carries out close co-operation with the authorities. The company is, and seeks to remain, a forerunner in matters such as the management of occupational safety on worksites and the fight against the grey economy. SRV's proactive efforts to develop its operations - which are co-ordinated in all of the Group's business areas - also play a key role in risk management.