Risk management is part of the company’s monitoring system and it aims to ensure that the risks to which the company’s business is exposed are identified, evaluated and monitored. It aims to help forecast the threats and opportunities for business operations and ensure the continuity of business.
The objective of internal control and risk management related to Componenta’s financial reporting is to ensure that the reporting is reliable and that all applicable laws and regulations have been complied with.
Componenta compiles its financial reporting in accordance with the International Financial Reporting Standards (IFRS), the new Finnish Securities Markets Act, the Finnish Accounting Act and the guidelines and statements of the Finnish Accounting Board, while also complying with the rules and regulations of the Financial Supervisory Authority and the rules of the Helsinki stock exchange.
The Board of Directors confirms the principles and responsibilities for risk management. The Board’s Audit Committee monitors the effectiveness of risk management systems. The President and CEO supervises the implementation of the risk management program and ensures that it focuses on matters that are essential for local and operational activities. The Corporate Executive Team participates in identifying and evaluating risks, in allocating responsibilities and in monitoring the risks.
The CFO is responsible for the general development of Componenta’s risk management.
The management of business operations is responsible for identifying and managing risks in their own business areas as part of their operational activities.
All employees are responsible for identifying and evaluating the risks that are related to their work or that are otherwise under their control and for reporting on them to their supervisors.
The financial risks relating to Componenta Group’s business operations are managed in accordance with the Treasury Policy approved by the Board of Directors. The Group’s treasury department manages financial risks and ensures for their own part the availability of equity and debt finance to the Group on competitive terms. The Group’s treasury department is also responsible for managing and hedging the cash position.
The Corporate Executive Team conducts the Group-level Enterprise Risk Management (ERM) process annually and monitors the major risks of the operations regularly. In the context of the ERM process, the main risks are identified and evaluated and corrective actions are decided on.
Componenta’s most significant risks related to the operating environment and business operations, and financial risks, are presented on the Group’s website.
The purpose of Componenta’s internal control is to ensure that the Group operates in line with its strategy profitably and effectively, that risk management is arranged appropriately and adequately, and that financial and operational reporting is reliable. Control is based on Componenta’s values, operating principles, policies and guidelines (the Componenta Way to Operate, the Disclosure Policy and the Code of Conduct). Internal control is a part of management, governance and daily operations.
Financial reporting and supervision are based on budgets drafted and confirmed once a year and on monthly performance reporting. The CFO is responsible for the financial reporting process and for ensuring that the related instructions are consistent and updated regularly. Controllers at the unit and division level as well as management are responsible for ensuring that reporting is carried out in accordance with instructions.
Open and adequate communications ensure an effective and functional control environment. Information on reporting tools as well as instructions and principles relating to financial reporting have been provided to all the parties involved in financial reporting, and they are also available on the Group’s intranet. Matters such as upcoming changes to IFRS and accounting principles or new reporting requirements are communicated to the financial organization on a regular basis. The Group’s CFO reports to the Board’s Audit Committee regularly on matters pertaining to internal control.
The Audit Committee appointed by the Board of Directors supervises the Group’s financial reporting process and monitors the effectiveness of internal control, internal audit and risk management systems, and reports its observations to the Board.
The profitability and efficiency of Componenta’s operations and the achievement of financial objectives are monitored regularly by means of Group-wide financial reporting. The effectiveness of measures in internal control related to financial reporting is monitored by the Board of Directors, the Audit Committee, the President and CEO, the Corporate Executive Team and operative management teams.
Common, Group-wide ways of operating also cover reporting, and the related instructions are included in the Controller’s Manual maintained by Group Accounting. The CFO has defined the control measures which cover the reporting process and allocated responsibilities for their implementation.
All operational business units have their own controller who is responsible for the unit’s financial reporting in cooperation with the management of the respective unit. The management team for each business unit analyses its own financial reports, including volumes, profits, costs, profitability and working capital, every month before the reporting meeting of the Corporate Executive Team.
The Board of Directors is responsible for the final evaluation of the Group’s result.
Componenta Group’s internal audit is conducted in accordance with the operating principles approved by the Board of Directors, which are based on the Group’s internal reporting and the annual audit plan approved by the Board.
Componenta Group’s financial administration conducts an internal audit of Group companies in accordance with the annual plan together with the external auditors.
Financial reporting that covers the whole Group regularly monitors how well financial targets are being met. The reports include actual figures, budgets and up-to-date estimates for the current year.
Related party transactions
Componenta’s related parties are composed of the Board of Directors and the Corporate Executive Team, as well as the managing directors of its most important subsidiaries and Group companies. The Company evaluates and monitors the appropriateness of any transaction made with its related parties, taking into account of any conflicts of interest. Componenta maintains a list of its related parties.
Due to the nature of the business, related party transactions between Group companies and natural persons are not, in principle, material, excluding any possible property transactions and business acquisitions. If the related party transactions are material from the Company’s perspective and if they depart from the Company’s normal business or have otherwise been made on unconventional market terms, the Company reports on the decision-making procedure concerning the related party transaction in question.