Risk Management
Risk management at Oriola-KD is a part of internal supervision. Business activities always entail risk. Accordingly, an optimal balance must be struck between the risk and the opportunity it presents. Effective risk management requires continual data on the risks observed in different parts of the organisation. Oriola-KD has a built-in risk management process which makes risk management an integral part of decision-making. As a rule, the goal of risk management is to support the achievement of strategic and operative targets alike. Awareness and management of risks helps the organisation identify business opportunities correctly and avoid unwanted risk.
Risk management policy
The Board of Directors of Oriola-KD has approved the company’s risk management policy in which the operational model, principles, responsibilities and reporting in risk management have been determined. The Group’s risk management seeks to identify, measure and manage risks that may threaten the operations of the company and the achievement of goals set for them.
Roles and responsibilities
Risk management at Oriola-KD is a constantly evolving process. Business risks and their reporting as well as the comprehensiveness of risk management is assessed by the Board’s Audit Committee. The Group’s risk management team is tasked with providing support to management and the Board in implementing the risk management policy. The risk management and quality assurance function in the Group provides practical coordination and guidance in the risk management process. The divisions have independent responsibility for managing risks relating to their activities and they thus support business activities. Internal Audit is tasked with evaluating the risk management process.
Strategic risks
Changes in market structure. Legislative changes in market structure may rapidly alter the Oriola-KD Group’s operational fundamentals. Factors of this kind might include a dismantling of the pharmacy monopoly in Sweden entirely or in part. Oriola-KD seeks to allocate the resources available to it in a manner that best allows´it to prepare for and benefit from any future changes in market structure. Substantial downward pressure on the prices of pharmaceuticals is also a risk factor. Oriola-KD seeks to control this risk by offering new extra services to its principals and customers. In addition, cost efficiency and cost flexibility are subject to constant improvement. Intense consolidation in the pharmaceutical sector. Consolidation in healthcare has led to decisions being made on a Europe-wide or global scale. Oriola-KD seeks to prevent risk from arising by strengthening its bargaining position through solid partnerships with suppliers and by developing local business concepts. Expansion-related risks in new markets and businesses. The main means for managing expansion-related risk is calculated risk-taking. All decisions are based on careful assessment and consideration of factors such as risk-reward ratio.
Operational risks
Sales and business risks. Pharmaceutical wholesaling is a business that in practice is wholly based on contractual relationships with principals. The agreement periods in pharmaceutical wholesaling as well as trade in healthcare equipment and supplies are generally short, lasting only for about a calendar year at a time, though business relationships with many principals have in fact been of long standing. Customer agreements for healthcare products, particularly those for consumer goods products, involve risk factors relating to the fact that the agreement periods with customers are typically longer than the corresponding periods with suppliers, in addition to which the customer agreements can contain, among other things, terms and conditions relating to pricing changes, which may differ from the corresponding terms and conditions in the agreements made with suppliers. Oriola-KD seeks to share this risk with suppliers by matching it with customer agreements. Property loss and business interruption risks. In addition to statutory insurance policies, Oriola-KD has property, liability and business interruption insurance to cover risks that are judged to be material in importance and can be limited by taking out an appropriate policy.
Risks related to product liability and equipment deliveries. Oriola- KD’s operations involve a certain degree of product liability because in its area of operations Oriola-KD markets a number of products under its own trademarks and/or outsources the manufacture of these products as a brand owner. In addition, Oriola-KD imports products from outside the EU area. In supplying equipment, the equipment is delivered to the customer installed ready for operation and as a rule, Oriola-KD is responsible for carrying out the installation work. Compared with the volume of goods delivered by Oriola-KD, the risk shall, in the estimation of management, be considered relatively minor.
Commitment of key employees The key employees of the Company are covered under the share incentive scheme decided by the Board of Directors. The scheme encourages sustained effort on the part of key employees by strengthening their commitment to the operation and development of the company. Risks related to information systems. Information systems are a central part of Oriola-KD’s business operations and the distribution and logistics services it provides. Oriola-KD endeavours, through means related both to ways of working and technology, to ensure the undisturbed operation of its systems and the integrity and reliability of its data. Information security policy, backup procedures and continuity planning are examples of risk management in this sector.