Risks and risk management
Risk is defined as an uncertainty before the occurrence of an event which might affect the company’s ability to achieve its established targets. Risks are naturally a part of all business and must be handled effectively. Risk management is intended to prevent and limit risks which might impact the business negatively.
On an annual basis, Balco carries out an overall risk assessment in which it identifies and assesses the risks threatening Balco’s achievement of its targets. Balco defines a risk as a future possible event which threatens the organization’s ability to achieve its goals. A risk assessment must be carried out in which risks related to external parties, the business, reputation and trademarks, IT, legislation and rules, finance, accounting/reporting and significant processes are identified and evaluated.
The risks identified are assessed based on the following two criteria: 1. Effect on earnings, employees and reputation. 2. The likelihood that the risk will occur within the planning period.
Balco’s management has identified conceivable events which might have an impact on the company’s business. The events have been evaluated and reduced to a net list which contains the risks considered to be the most relevant. In order to handle and combat identified risks, a number of control activities (risk-limiting measures) have been established. For each identified risk, there are activities to combat and handle the risk.
An evaluation of the effectiveness of the control activities is carried out on an annual basis. Balco has a monitoring process for the entire group in which the effectiveness of the controls is evaluated and reported to Balco’s CFO. The CFO is responsible for presenting the results of the evaluation to the audit committee and the board of directors.
Overarching risk areas
The group is exposed to various types of risks in its business operations. The risks may be categorized as industry and market-related risks, business-related risks, financial risks, and regulatory risks.
- Industry and market-related risks
- Business-related risks
- Regulatory risks
- Financial risks
Balco’s risks and uncertainty factors are described on pages 54-57 of the 2019 Annual Report.