Our financial responsibility is based on our company’s financial success and ability to create value for stakeholders. Nokian Tyres conducts active and result-oriented financial management. Our Finance function collects extensive information on the operating environment as well as the different stages and results of our company’s business processes. Good financial management enables planned activities and forecasting. In 2017, Nokian Tyres performed well in all of its key business areas and is now back on track to growth.
Our business must be profitable so that we are able to offer security, work and well-being for our personnel, while also considering the investors, customers and other stakeholders. Our strategic goal is to grow faster than the market and be the world’s most profitable tyre company.
The goals of our Finance function in the coming years include enabling new projects and investments by ensuring sufficient cash and credit limits. In 2017, the Finance function was closely involved in the preparations of our factory investment in Dayton, Tennessee. In addition, Finance is closely involved in the implementation of our company’s potential structural changes, including the assessment and management of the related risks and opportunities, while adapting our financial reporting according to the business needs.
Product and customer profitability guide our operations, which we develop in a cross-organisational way, together with the business units. Following our internationalisation, our Finance function is actively involved in developing global processes and systems that enable the best possible service for Nokian Tyres’ customers. Our goal is to ensure that the systems grow in a controlled manner along with the company and that our operating models continue to be reasonable and flexible locally. In relation to these efforts, one of our most significant projects in 2017 was renewing the ERP system of our Russian factory.
The head of financial administration is Vice President of Finance, who reports to the company's President & CEO. Together, they are also in charge of investor relations. Major investments are discussed by the regularly convening Investment Board.
Financial management covers the following material topics:
For more information about the effects of the special topics on the Nokian Tyres value chain and their scope, see the materiality analysis.
Our corporate governance is based on the annual general meeting, Board of Directors, President & CEO, group’s management team, Finnish Limited Liability Companies Act and applicable regulations as well as the group’s policies, procedures and practices. The Board of Directors has approved the corporate governance statement and the company’s auditors verify that the statement and its related descriptions of the internal reporting controls and risk management correspond to the financial reporting process.
See our full corporate governance statement here. Read more about our report of salaries and remuneration here.
The basic functions of every sustainable company include risk management, which involves identifying and prioritising the applicable risk factors and preparing for the main risks. At Nokian Tyres, Corporate Risk Management (CRM) also includes the sustainability aspects.
The group has adopted a risk management policy, approved by the Board of Directors, which supports the achievement of strategic goals and ensures business continuity. Our group’s risk management policy focuses on managing both the risks pertaining to business opportunities and the risks affecting the achievement of goals in the changing operating environment.
The risks are classified as strategic, operational, financial and hazard risks. Strategic risks are related to customer relationships, competitors’ actions, political risks, country risks, brand, product development and investments. Operational risks arise as a consequence of defects or failures in the company’s internal processes, personnel’s actions or systems or due to external events, such as legislative changes, unpredictable rulings by judicial systems or authorities or changes in raw material prices. Financial risks are related to fluctuations in the interest rate and currency markets, refinancing as well as counterparty and receivables risks. Hazard risks may lead to injuries, property damage, production outages, environmental impacts or liabilities to third parties.
The most significant risks related to Nokian Tyres’ business are the country risks related to the Russian business environment, reputation risks, tax risks (especially in Finland), product and R&D risks, production outage risks, currency and receivables risks as well as the governance, information security and data administration risks. Due to the company’s product strategy, interruption risks that are related to marketing and logistics may also have a significant impact, especially on peak season sales.
In 2016, we conducted in-depth assessments of sustainability risks in accordance with our road map and included detailed evaluations of sustainability risks. The risk analysis conducted at that time focused special attention on corporate social responsibility risks, the most significant of which are related to the company’s reputation and product quality. In 2017, we continued our work on the risk maps related to risk management and expanded our views to include the sustainability, human rights and data security aspects.
The risk management process aims to identify and evaluate the risks and to plan and implement the appropriate practical measures for each risk. Among others, such measures may include avoiding the risk, reducing it in different ways or transferring the risk through insurance policies or agreements. Control functions and measures refer to verification or back-up procedures that are applied in order to reduce the risks and ensure the completion of the risk management measures.
There is no dedicated organisation established for risk management. Risk management is considered as the company’s internal activity. The related responsibilities follow the general division of responsibility adopted elsewhere in the organisation and its business, which is followed by each person individually. We take into account our corporate social responsibility and the related aspects in all of our functions and at all levels. In 2017, we continued developing the group-level risk management responsibilities and roles. The changes will become effective at the beginning of 2018. The new assignment of roles includes a Vice President responsible for group-level risk management and the related implementation measures. Our company’s Board of Directors discusses the most significant risks and their related measures annually in connection with the strategic process.
Our policy regarding investor relations guides our continuous interaction with our investors. In line with the policy, we provide all of our investors with the same transparent and timely information on our activities at all conditions. All investors are equally included in the scope of our general and public disclosures. One of our ways of disclosing information is our investor website.
Investors can contact us personally or at a common email address intended for investors. We address the questions and raised issues in accordance with our policy on investor relations. We also offer our investors an opportunity to have one-on-one discussions or group discussions. We regularly meet with our major investors and arrange factory visits for them in Finland and Russia.
Our group’s communication is based on the Nokian Tyres’ communication policy.
Read more about our principles of investor relations.
In addition to pioneering products and excellent service, we also want to be an industry pioneer in terms of sustainability. The more often our brand and products are associated with sustainability in addition to safety and high quality, the more we can attract sustainability-conscious customers. Corporate sustainability also improves our competitiveness, thereby supporting our goal of profitable growth. Business success, in turn, benefits our surroundings and stakeholders.
In addition to our corporate sustainability goals and road maps, our externally assured GRI Standards-compliant Corporate Sustainability Report guides the development of sustainability in our company. For us, profitable growth, good HR management and environmental aspects, along with product safety and quality, are important for the development of sustainable business operations.
Our selection for Dow Jones’ DJSI World sustainability index in 2017 may be considered as a result of our long-term efforts. With a total sustainability score nearly twice as high as the industry average, our company significantly improved its results in the 2017 assessment. Our score of 78 points was only one point behind the world’s highest score in the Auto Components sector. We were the highest-ranking tyre manufacturer. The Dow Jones Sustainability Index (DJSI) is an annual sustainability assessment for large publicly traded companies, performed by the Swiss RobecoSAM.
We are included in the OMX GES Sustainability Finland GI index, which provides transparent, objective and reliable information for making responsible investments. The companies are selected for the index based on their compliance with the requirements that focus on the management of environmental, social and corporate governance (ESG). We are also included in the STOXX Global ESG Leaders and FTSE4Good indices.
We track financial management with the following indicators:
This page is included in KPMG’s assurance scope. Assurance report can be found here.