The most significant risks and uncertainties

Alma Media defines as risks events or circumstances that could prevent reaching a strategic, operative or economic objective. The risks are classified as strategic, operative and financing risks.

Strategic risks

The most critical strategic risks for Alma Media are a significant drop in its print newspaper readership, a permanent decline in advertising sales and a significant increase in distribution and delivery costs. The group subscriptions of the major financial and technology-related magazines are significant in scale. Changes to the subscription agreements could have a substantial impact on the magazines’ total subscription volumes. The media industry is undergoing changes following the transformation in media consumption and technological development. Alma Media’s strategic objective is to meet this challenge through renewal and the development of new business in digital consumer and business services.

Fluctuating economic cycles are reflected in the development of advertising sales. Advertising sales account for approximately half of the Group’s revenue. Business operations outside Finland, such as in Eastern and Central European countries, include country-specific risks relating to market development and economic growth. The expansion of business outside Finland has reduced the risks inherent in operating in one market area.

Operative risks

Disturbances of information technology and communications as well as disruption of printing are the most important operative risks. The risks of information technology and communications are reviewed and managed in cooperation with the group’s ICT organisation and the business units as well as cooperation partners. Especially the technical operation and vulnerability of the digital business is closely monitored in the entire media industry.

In printing, it is important to prevent disruptions of operations in advance by means of good management and safety culture as well as with the help of guidelines. Back-up printing plans are made in preparation for interruptions.

Financing risks

The Chief Financial Officer of the Group is responsible for the Group’s financing. Alma Media’s centralised financing function takes care of the operative financing of all companies in the Group. The function includes the management of payments and liquidity, funding and investments.

Capital market arrangements are used for long-term financing. The cash surplus is invested according to the Group’s financing policy in financially sound investment instruments with a maturity of less than one year.

Alma Media has no significant financing risks. The financing risks are described in more detail in the Financial Statements.

 

   

 

Risk   Risk definition Risk mitigating actions  

Strategic risks

   

Change in media consumption

Industry transformation following trends in media consumption and technological development. The capacity of product and service development to assess changes in consumer behaviour or invest in the appropriate technological service solutions.

Business development driven by customer needs. Measures to promote digital business competitiveness. Sufficient investments and resources in research and development.

The development of print media

A significant drop in subscribers and readers, a permanent decline in advertising sales and a significant increase in distribution and delivery costs.

Maintaining and developing an interactive media-reader relationship, customer satisfaction surveys, Alma Media’s internal cooperation in content production, content sales, advertising sales, support functions and product development. Own distribution network, distribution partnerships and cooperation with publishers.

Group subscriptions of magazines

Changes in the group subscriptions of the major financial and technology-related magazines.

Customer satisfaction surveys and continuous service development based on the results, in cooperation with group subscribers.

Fluctuating economic cycles

Advertising represents a significant share of revenue and is sensitive to general economic cycles.

Service business development, continuous analysis and monitoring of the operating environment, preparedness to implement structural changes as necessary, active development of the existing business, diversification of revenue sources, geographic diversification of business.

Changes in legislation

Potential changes in legislation concerning information security, postal deliveries and taxation.

Internal training, monitoring legislation, building processes for legally required changes in the organisation.

Country-specific risks

Business operations involve country-specific risks relating to market development and economic growth. Geographic diversification and internationalisation help reduce the country-specific risk of the domestic market.

Ongoing market development analysis, monitoring and analysing Group- and country-specific risks.

Operational risks

   

Disturbances of information technology and communications

Reliability of information networks.

Contingency plans, decentralised server solutions, cloud computing, ensuring sufficient competencies.

Cyber risks

The risk of being targeted by information security attacks and data theft.

Contingency plans and risk management actions, ensuring sufficient competencies, insurance.

Disruption of printing operations

Disruption of printing operations due to an accident, mechanical fault or information system error.

Contingency and restoration plans, back-up arrangements, customer communication, preparedness for crisis communication.

Competence

Technological development and the demands of new technology increase the risk of obtaining and maintaining sufficient competencies.

HR strategy, creating commitment in key individuals, additional resource allocation and trainee programmes, employee well-being.

Financial risks

   

Refinancing risk

The company is unable to renew maturing financing agreements.

Treasury policy, financing plan and agreements, sufficiently long maturity of loans, sufficient equity ratio.

Liquidity risk

The company is unable to cover its maturing obligations in the short term.

Treasury policy, financing limit agreements of sufficient size.

Interest and foreign exchange risks

A change in an interest rate or currency exchange rate causes a significant impact on the company’s profit or balance sheet position.

Treasury policy and the hedging principles defined therein.