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 and a decrease in the online audience of digital media, 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. An increasingly important source of competitive advantage, but also a strategic risk, in Alma Media’s business is the ability to use customer data to improve the product and service offering for advertisers and enrich end user services. Alma Media will manage customer data and behavioural data by centralising customer data repositories and deploying analysis and activation technology, taking regulatory requirements into consideration. As the focus of media consumption shifts to digital channels, Alma Media is responding to the transformation of the operating environment by developing digital products and services for consumers and businesses.

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.

 

 

RiskRisk definitionRisk 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. Ensuring that content is interesting. Developing the user interfaces of media as well as purchasing paths and payment systems, for example. Sufficient investments and resources in research and development.

Change in the competitive landscape

Expansion of international platforms, industry convergence, reduced price competitiveness. Technological solutions and implementations by platform providers that restrict the operations of other companies.

Service business development, active development of the existing business, diversification of revenue sources, geographic diversification of business.

Printed and digital media audiences

A significant drop in print subscribers and readers, a drop in online service subscribers and users, a permanent decline in advertising sales and a significant increase in distribution and delivery costs and pressure concerning the pricing of services.

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.

Customer data

The ability to utilise the growing amount of customer data in delivering better and more targeted service solutions. The capacity of product and service development to anticipate changes in customer needs. Violations of the GDPR or other regulations governing data protection. Data protection violations arising from the management of complex technological systems or inadequate employee competence.

Business development driven by customer needs. Measures to promote digital business competitiveness and data management. Sufficient investments and resources in data management and systems as well as the development of data protection procedures and employee competence.

Fluctuating economic cycles

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

Continuous analysis and monitoring of the operating environment, preparedness to implement structural changes as necessary.  

Changes in legislation

Interpretations by the authorities regarding the practical application of the GDPR, the upcoming ePrivacy Regulation and potential legislative changes concerning taxation.

Internal training, monitoring legislation and the regulatory interpretations of the authorities, 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.

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.

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 and customer communication.

Competence

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

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

Financial risks

  

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.

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.

 Alma Media’s business risks are also closely related to responsible journalism and responsible marketing. Risks related to the reporting of non-financial information  

Risk Risk definition Risk mitigating actions

Risks related to journalism

The erosion of the appreciation and reliability of media content. Monitoring and managing editorial content is challenging in the digital environment. 

Developing editorial teams’ practices and employee competence. Reader satisfaction surveys, customer contacts and feedback. Participation in journalism industry events and organisations.

Risks related to marketing

Diminishing reliability as an advertising environment. Publishing advertising that is contrary to good marketing practices or disrupts the reading experience. Ethical risks related to digital marketing, such as programmatic buying, including partner risks, providing a safe brand environment as a publisher. Technological risks.

Customer satisfaction surveys, customer contacts and feedback. Developing marketing practices and employee competence. Technology acquisition.