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Risk management

Risk Management Policy

Raisio’s Risk Management Policy defines the objectives, principles and responsibilities of risk management. The target of risk management is to identify risks and to secure the continuity of Raisio’s business operations, safety of products and activities, personnel and assets and to prevent events affecting negatively the shareholder value.

Raisio emphasises preventive measures in its risk management and strives to continuously improve risk management in all of its aspects. The business divisions independently make decisions regarding operational risk management, which includes, for example, safety at work and the selection of business counterparties and payment terms. Raisio has a Group-wide insurance programme in order to manage, for example, risks related to property and continuity. Financial risks, including insurance management, are centralised to the financial department. Possible findings of internal control and business risks are reported to the Board as part of monthly financial reporting.

Risks and sources of uncertainty in business operations

The Eurozone economy is expected to continue its sharp growth in 2018. The growth is based on private consumption and the investment recovery, supported by low interest rates and decreased political uncertainty. However, the threat of rising protectionism has not disappeared.

The UK voted to leave the European Union in the EU referendum (Brexit). All details related to Brexit are still unclear. The uncertainty arising from the decision is expected to weaken the UK’s growth prospects and to continue to cause significant volatility in the external value of the pound.

The Finnish economy grew sharply in 2017 and the strong growth is expected to continue in 2018. Economic development is based on private consumption, rising investments and exports, low interest levels and falling unemployment rates. Economic growth is burdened by rising inflation.

In Russia, the economy is recovering and consumer purchase power growing. In Ukraine, the business environment remains challenging.

Changes in exchange rates significantly affect Raisio’s net sales and EBIT, directly and indirectly. The pound is volatile as a result of the uncertainty related to Brexit, which impacts Raisio’s net sales and EBIT as considerable part of them is generated in the UK even after the confectionery business divestment. Volatility in the rouble's external value affects the exports of feeds and flake products. It may also have an impact on the utilisation rates of production plants in Finland.

The price and availability of agricultural raw materials are a major challenge for Raisio's businesses. Global warming and extreme weather events can rapidly affect the crop expectations, supply, demand and price of these commodities. Changes are also possible in supply, demand and price of other key raw materials. In terms of business profitability, the role of risk management remains essential both for value and volume, of which the growth period in Finland in 2017 has been a good reminder.

Raisio expects the grocery market to remain fairly stable compared to other sectors. Changing retail trade and intensifying competition are a challenge for the food industry too, through sales prices and sales terms in all Raisio’s main markets.

Profitability and liquidity problems in the Finnish agriculture and livestock farming weaken the purchasing power of the sector and put pressure on Raisioagro's profitability. The crisis in Ukraine and Crimea led to the EU sanctions in 2014and Russia’s counter-sanctions. Especially the import ban of dairy products hampers Raisioagro’s operations directly and indirectly. For Raisioaqua, it is important that its fish feed exports work without interruption. In addition, Russia might expand the scope of its import bans into new product groups, and not only in feeds but also in foods. 

Preparing for and adapting to Brexit remains a key challenge for Raisio’s businesses in 2018, and for example in the Benecol business, this may lead to changes in subcontracting arrangements. International raw material chain and contract manufacturing of consumer products expose especially the Benecol business to the availability, price and currency risks.

To ensure growth and profitability of its operations, Raisio may carry out corporate restructuring which, as rationalisation projects, may result in significant one-off expenses.