The objective of Vaisala’s risk management is to identify and manage material risks related to strategy implementation and business operations. Vaisala has a risk management policy which has been approved by the Board of Directors, and which covers the Company's strategic, operational, hazard and financial financial risks. The policy aims at ensuring the safety of the Company's personnel, operations and products, as well as the continuity and compliance of business operations.
The Board of Directors defines and approves risk management principles and policies, and assesses the effectiveness of risk management. The Audit Committee reviews compliance with risk management policy and processes.
Vaisala’s Risk Management Steering Group comprises key internal stakeholders. The Steering Group is responsible for the operational oversight of the risk management process and assuring that all significant risks are identified and reported, and risks are acted upon on all necessary organizational levels and geographical locations.
Risk management is integrated into key business processes and operations. This is accomplished by incorporating applicable risk identification, assessment, management and risk reporting actions into the core processes. The most significant risks are reported to the Vaisala.
Near-term Risks and Uncertainties
Uncertainties in political situation and governmental customers’ budgetary constraints may reduce demand for Vaisala’s products and services or slow down customer projects.
Delay in developing applications for digital solutions as well as acquiring and in building related competences for sales and business operations may slow down growth in Weather and Environment Business Area. Closing of infrastructure projects in Weather and Environment Business Area may be postponed by budgetary constraints, complex customer decision making processes, changes in scope, and financing. Thus, Vaisala’s financial performance may vary significantly over time.
Prolonged new product ramp-ups, market acceptances and regulatory certifications of new offering, such as power transformer monitoring products, supplementary air quality network sensors, and continuous monitoring systems, may postpone the realization of Vaisala’s growth plans. Weakness in introducing new technologies and applications may result in erosion of price premium or loss of cost competitiveness and market position.
Long interruption in production or test equipment or disruption in suppliers’ and subcontractors’ delivery capability or product quality may impact significantly Vaisala's net sales and profitability. Cyber risk and downtime of IT systems may impact operations, delivery of information services or internet-based services, or cause financial loss.
Vaisala’s capability to successfully complete investments, acquisitions, divestments and restructurings on a timely basis and to achieve related financial and operational targets may include uncertainties and risks, which may negatively impact net sales and profitability.
Further information about risk management and risks are available on the company website at www.vaisala.com/investors, Corporate Governance and www.vaisala.com/investors, Vaisala as an Investment.
Interim Report January-September 2017, October 23, 2017
Vaisala's business operations are subject to various risks which may have an adverse effect on the company. The list below is not complete but it explains some of the risks with their potential impacts and how Vaisala manages those risks today.
|Global lowering of price level and gradual loss of price premium||Lower gross margin||Continued focus on product leadership|
|Strive for outstanding customer experience and superior product quality|
|Customer budget cuts in developed countries and political unrest in developing economies||Reduced revenue||Regional sales capabilities|
|Sales model for upgrades|
|Success of growth in information service businesses not meeting targets||Reduced return on investments||Strong engagement with target industries|
|Frequent business follow-ups|
|Efficient sales execution|
|New product introduction and/or entry to new markets slower than planned||Delayed return on investment, cost overruns due to engineering of legacy products||Sales organization and channel development|
|Early product piloting and concepting|
|R&D support for production ramp-up|
|Availability of IT systems||Interruptions to operations, especially manufacturing||Stabilization of operational IT environment, shortening of resolution time of critical incidents|
|Change management process with impact analysis and formal approvals|
|Business continuity risks||Delays in deliveries, and consequent loss of customers||Active supplier risk assessment|
|related to suppliers||Supplier base optimization|
|Long-term supplier development plans|
|Strategic supplier continuity audits|
|Cyber risks||Interrupts to operations or information services||Information Security Management System (ISMS) creation and deployment|
|Financial loss||Cyber insurance|
|Loss of trade secrets or personal data|
|Change management performance||Reduced revenue or profitability caused by failed or delayed investment, acquisition, divestment or restructuring projects||Continuous progress follow-up|
|Resource allocation for critical projects|
|Project delivery performance and interdependencies||Uncertainty of revenue forecasting, lower profitability||Continuous sales and delivery process follow-up and improvement|
|Political, legislative or||Loss of market potential, or increased cost of accessing a market||Geographic and market diversity of business|
|regulatory changes||Market and regulatory foresight|
|Inventory risk||Reduced profitability due to write-down||Development of product ramp-down and material management and inventory processes|
|Fire, contamination, or other major disruption in the clean room operation||Reduced revenue||Emergency stock of sensor components, risk based management of production equipment and spare parts, safety of facilities|
|Loss of customers||Business continuity planning|
|Field service health and safety risks related to working conditions||Harm to health or safety of personnel||Continuous development of occupational health and safety system, emergency procedures|
|Traveler tracking system|
|Failure of infrastructure supporting information service businesses||Reduced availability of information services||Geographic system redundancy across four server sites|
|Natural disaster, epidemic,||Impaired business environment leading to cancellation of orders, or delays in deliveries and revenue||Geographic business diversity|
|civil unrest, terrorism||Monitoring of the business environment|
|Risk assessment of business opportunities|
|Credit risk||Credit loss||Secured terms of payment, business credit checks, diversification of customer pool|
|Liquidity and refinancing risk||Unavailability of credit facilities||Sustainable capital structure|
|Financial credit and interest||Financial credit loss, lower finance income||High credit rating of financial counter parties, low risk cash investment|
|Currency risk||Lower net profit due to foreign exchange rate movements||Currency hedging|