Vaisala - Annual Report 2005

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Internal control principles

Internal control is embedded in Vaisala's operating processes, i.e. the control procedures are part of the processes. The company does not have a separate Internal Audit function, but tests the functionality of the process continuously through spot-checking. In addition to standard financial auditing, the company carries out audits in specific areas (see Internal Audit) by assigning a the task to the company of public accountants used.

Organization of risk management

Vaisala’s risk management policies are determined by the Board of Directors. The policies are aimed at managing identified risks. The policy principles determine the company’s approach to potential risks and their management.

Vaisala’s Management Group determines more specific guidelines for the Group’s operations, e.g. approval, offering , procurement rights and terms of payment.

The usual risks related to international business affect Vaisala’s operations.

Financial risk management

Group financing is arranged through the parent company, and the financing of the subsidiaries is arranged through internal loans. The parent company also provides the subsidiaries with the necessary credit limit guarantees. The parent company assumes responsibility for financial risk management and for investing surplus liquidity.

Interest rate risk

As the Group has no interest bearing liabilities, the interest rate risk is non-existent.

Currency risk

The Group’s currency risks are conversion and transaction risks related to its foreign subsidiaries, resulting from commercial accounts receivables and accounts payables. The transaction risks are mostly related to USD, GBP and JPY. The company uses currency forwards for hedging purposes. The hedging is done by the parent company.

Liquidity risk

With the company’s current balance sheet structure, liquidity risks are non-existent.

Credit risk

Liquid assets are directed, within set limits, to investments whose creditworthiness is good. The investments and investment limits are revised annually.

Internal audit

The company does not have a separate Internal Audit function. Internal auditing tasks, when carried out, are assigned to the company of public accountants (see Internal control principles).