Risks and risk management

VVO Group’s proactive approach to risk management is aimed at ensuring that operations run smoothly and that key objectives can be achieved.

Risk management

Risk management at VVO Group is based on the risk management policy approved by the Board of Directors. Risk management has been incorporated into the company’s integrated management system and internal control. Risk management seeks to ensure that strategic and operational objectives can be achieved by identifying and assessing the most notable risks associated with VVO’s operations and defining means to manage them.

Risk management is ultimately the responsibility of the company’s Board of Directors, which lays down the objectives of risk management and monitors the most notable risks. The Audit Committee appointed up by the Board of Directors is responsible for evaluating the adequacy and appropriateness of risk management within the company. Responsibility for the practical implementation of risk management rests with the company’s operational management. Regular, quarterly reports of the most notable risks are produced for the Audit Committee and the Board of Directors.

Risk management is based on the risk assessments carried out in connection with the strategy and annual planning processes, which involve identifying the most notable risks, evaluating their likelihood and potential impacts, and defining means to manage them. VVO Group’s most notable risks have been grouped under strategic and operational risks on one hand and under financial and liability risks on the other.

Most notable risks

The most notable risks associated with customer management relate to a potential drop in the rental occupancy rate and an increase in tenant turnover. Factors affecting these risks include economic fluctuations and shifts in demand both nationally and locally. The financial and operational occupancy rate of rental homes, tenant turnover, number of applicants, and changes in these figures are monitored by region on a monthly basis.

VVO strives to increase occupancy rates and to reduce tenant turnover by boosting the rental business, repairing apartments and properties, and strengthening relationships with customers. VVO Group’s cooperation with residents plays an important role in improving customer relations.

Ensuring that the value of VVO’s housing stock continues to rise requires investments in urban growth centres, measures to ensure that units are fit to rent, and systematic repairs across all properties.

Major fluctuations in market interest rates and margins may have a negative impact on VVO Group’s financial performance and delay the launch of new development and repairs. The interest rate risk associated with market-based loans is controlled by interest rate swaps and hedging. The interest rate of state-subsidised loans is tied to the Finnish consumer price index, which can cause considerable fluctuations in annual interest costs. The company’s investment activity may also be affected by access to finance. Investments with long economic lives also require long-term financing, and the risk of refinancing increases with shorter maturities. The risk associated with access to finance is controlled by securing new sources of finance.

The most notable risks associated with properties are liability risks, such as water damage and fire. Liability risks are managed with appropriate preventive safety measures and by insuring properties against damage. VVO Group regularly reviews its insurance policies as part of overall risk management. The main insurance policies are property, liability, loss of profits, accident, travel and vehicle insurance.

Financial risks

The Group’s treasury function has two main tasks: 1) to acquire a sufficient amount of financing for the Group’s needs at a competitive price, and 2) to identify and assess the Group’s financial risks and arrange hedging required by the group companies.

VVO Group’s treasury policy has been approved by the Board of Directors. Financial risks are described in more detail in the notes to the 2015 financial statements.

 

 

© VVO Group plc 2015