Financial management at Nokian Tyres
In our company, financial management actively influences our operations and decision-making, thereby enabling us to reach our objectives. Our Finance function carefully collects information on the operating environment as well as the different stages and results of the company’s business processes. By processing this information, we aim at forming an understanding of the impact that our future business decisions will have. Good financial management provides our company with the best opportunities for planned and foreseeable operations as well as for finding the best operating models in different situations.
Reflecting on our revised group strategy, the goals of Finance in the coming years include enabling new projects and investments by ensuring sufficient cash and credit limits. Finance is closely involved in the implementation of the company’s potential structural changes, including the assessment and management of the related risks and opportunities, while adapting the financial reporting according to the company’s business needs. Product and customer profitability guide the company’s operations, which are developed together with the business units. Finance is also actively involved in developing global processes that enable the best possible service for Nokian Tyres’ customers.
The head of financial administration is Vice President of Finance, who reports to the company President and CEO. Together, they are in charge of investor relations. Major investments are discussed by the regularly convening Investment Board.
Our corporate governance is based on the annual general meeting, Board of Directors, President and 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.
- The annual general meeting holds the highest decision-making power. The annual general meeting decides on matters such as verifying the company’s annual accounts, profit distribution and discharging the board of directors and the President and CEO from liability. The annual general meeting also elects the members of the board and the auditors and determines their compensation. In addition, the annual general meeting can make decisions concerning amendments to the articles of association, issue of shares, granting warrants and acquisition of the company’s own shares, for example.
- Shareholders have the legal right to propose matters for consideration by the annual general meeting by submitting a written request to the board of directors in time for including the matter in the invitation to the meeting.
- The board of directors is responsible for corporate governance and the appropriate conduct of operations. The board holds the general authority in company-related issues, unless other company bodies have the authority under the applicable legislation or articles of association. The guiding principles and key tasks of the board are specified in the Limited Liability Companies Act, articles of association and board’s working order. The key tasks include consolidated financial statements and interim reports, proposals to the annual general meeting, appointing and dismissing the President and CEO and organising financial control.
- The President and CEO conducts the group’s business and manages the company operations in accordance with the instructions and guidelines provided by the board of directors. The President and CEO may, considering the extent and nature of company operations, only undertake unusual or far-reaching actions with the board’s authorisation. The President and CEO is liable for ensuring the legal compliance of the company’s bookkeeping and for arranging reliable asset management.
- The group’s management team assists the President and CEO in managing the company operations. In accordance with the group’s meeting policy, the Management Workshop convenes once per month and it is attended by the President and CEO as well as the Business Unit Vice Presidents, service centre Vice Presidents, Vice President for Russian operations and chief audit executive (CAE).
- The group’s internal control mechanisms are in place in order to ensure that the financial reports released by the company contain material and accurate information on the group’s financial standing. The group has defined group-level instructions and policies for the key operative units specified below in order to ensure efficient and profitable company operations.
The Group has adopted a risk management policy, approved by the Board of Directors, which supports the achievement of strategic goals and ensures continuity of business. The Group’s risk management policy focuses on managing both the risks pertaining to business opportunities and the risks affecting the achievement of the Group’s 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, R&D, and investments. Operational risks arise as a consequence of shortcomings or failures in the company’s internal processes, actions by its personnel or systems, or 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 interest rates and currency markets, refinancing, and counterparty risks. Hazard risks are risks that 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, product and R&D risks, production outage risks, currency risks, and governance and data administration risks. Due to the company’s product strategy, interruption risks that are related to marketing and logistics may have a significant impact especially on peak season sales.
The risk management process aims to identify and evaluate the risks and to plan and implement practical measures for each risks. Among other things, such measures may include avoiding the risk, reducing it in different ways or transferring the risk through insurance or agreements. Control functions and actions are control or back-up procedures applied to reduce risks and ensure the completion of risk management measures.
Risk management is not assigned to a separate organization; its tasks follow the general distribution of responsibilities adopted elsewhere in the organization and its business activities. The company’s Board of Directors discusses the risks annually in connection with the strategic process.