Risk Management

At Orthex, the purpose of risk management is to ensure the fulfilment of customer promises, business profitability, ability to pay dividends, shareholder value creation, implementation of responsible business practices and business continuity. The goal is achieved when Orthex is aware of the uncertainties, risks, and opportunities associated with targets and operations, and consistent and effective methods to identify, evaluate, and manage risks and their consequences.

Orthex has a risk management policy, which provides guidance regarding the management of risk to support the achievement of corporate objectives, protect staff and business assets and ensure financial sustainability. The principles of risk management are based on the Finnish Corporate Governance Code.

Responsibility for the implementation of risk management lies with the Management Team. In addition, each employee must be aware of and manage the risks in their own operating environment and area of responsibility. The Board of Directors provides policy, oversight and review of risk management.

Risk management principles

Risk management is a systematic activity designed to ensure comprehensive and appropriate risk identification, assessment, management and control. It is an integral part of Orthex’s planning and management process, decision making, day-to-day management of operations, and monitoring and reporting procedures. Risks are assessed and managed in a business-oriented and thorough manner. This means that key risks are systematically identified, evaluated, managed, monitored and reported as part of the business.

Risk classification

Risk refers to an event or circumstance that may hinder or prevent the achievement of targets or may result in missing of business opportunities. Orthex classifies risks in three groups:

•          Strategic risks

•          Operational risks

•          Financial risks

Strategic risks refer to uncertainty that is primarily related to changes in the operating environment and the ability to utilize or anticipate these changes. These changes may relate, for example, to the general economic situation, customer consumption behaviour, competition, legislation or technological developments. When assessing strategic risks and opportunities, the goal is to find the business opportunities that are used to achieve the goals with manageable risks, while avoiding those that present unreasonably high risks.

Operational risk means a circumstance or event that can prevent or hinder the achievement of objectives or cause harm to people, property, business, information or the environment. Operational risks are avoided or reduced, but in such a way, that the costs of risk avoidance are proportionate to the magnitude of the risk.

Financial risks are those related to Orthex’s financial position. These include e.g. availability and cost of finance, NWC and liquidity, and foreign exchange rate fluctuations.

Non-economic impacts are also considered when assessing risks. Reputation risk arises if Orthex’s operations conflict with the expectations of various stakeholders, such as customers, suppliers, regulators or shareholders. Responsible practices are key to preventing reputational risks. Reputation risks are managed through timely and adequate communication.

Risk management process and reporting

Orthex prioritizes risks according to the importance of the risk by assessing the impact, likelihood and level of risk management of the risk materialization. Risk management measures address the most significant risks through cost-effective and appropriate policy options.

The Management Team regularly monitors the implementation of risk management. If necessary, corrective measures will be taken.

The Management Team reports to the Board of Directors on risks and management measures 2-3 times a year. The Board reviews the most significant risks, measures to manage them and assesses the efficiency and effectiveness of risk management. The Board reports on the most significant risks and uncertainties in the financial statements and any material changes in the interim reports.