Risk management and internal control

Raute's risk management policy is approved by the Board of Directors. The Board is responsible for organizing internal control and risk management, and for monitoring their efficiency.

Preventive risk management ensures continuity

The aim of risk management is to further the achievement of strategic and other objectives by foreseeing and limiting substantial risks and the negative effects of occurred risks on business. Preventive risk management ensures the continuity of operations.

Risk management also includes recognizing, assessing and preparing for the risks related to business opportunities. The primary goal of crisis management is the safety of the personnel.

The Group’s identified key risk areas relate to the nature of the business, the business environment, financing, damage or loss and information security. The fluctuations in demand resulting from economic cycles and delivery and technology risks have been identified as the Group’s most significant business risks.

Changes in the global economy and financial markets may have a negative impact on Raute’s operations, performance, financial position and sources of capital. Raute is subject to geopolitical and macroeconomic conditions, where currently prevailing high inflation and increasing interest rates may give cause to economic downturn. Such a downturn would likely impact Raute’s operations and reduce underlying demand. The most important short-term risk for Raute continues to be Raute’s remaining exposure to Russia. Following the renegotiations with Russian customers, the risk position continued to reduce during the quarter. The remaining order book is still vulnerable to changes in regulation, sanctions, financial transactions and customer’s ability to conclude the contracts. The changing sanctions result in uncertainty in our ability to operate in line with our contracts and recognize revenue from our order book in progress. A large part of Raute’s technology and services has fallen under the scope of the sanctions. In addition, the termination of many ongoing contracts has put pressure on the company’s short-term working capital financing.

Aside from the geopolitical risk, the most significant short-term risks for Raute are related to the input price inflation and availability of raw materials, components and freight.

Raute has started a development program, to improve competitiveness and profitability, that aims to achieve annual savings of some EUR 4-5 millions by the end of 2023. The company is exposed to a risk of capturing the savings within the planned timeline.

Restrictions resulting from the pandemic caused by Covid-19 may continue to have a negative impact on Raute’s outlook also in the future, but to a lesser extent than in the two previous years

Organizing risk management

Raute’s risk management policy is approved by the Board of Directors. The Board is responsible for organizing internal control and risk management, and for monitoring their efficiency.

The Executive Board defines the Group’s general risk management principles and operating policies and defines the boundaries of the organization’s powers. The President and CEO and the CFO regularly report significant risks to the Board.

The Group’s President and CEO controls the implementation of the risk management principles within the entire Group, while the Presidents and CEOs of the Group companies are responsible for risk management in their respective companies. The members of the Group’s Executive Board are responsible for their own areas of responsibility across company boundaries.

Raute has no separate internal auditing organization. The Controller function oversees the annual internal control plan, develops internal control and risk management procedures together with the operative leadership, and monitors compliance with risk management principles, operational policies and powers.