Nokia 2007 Annual Report Download - page 208

34. Principal Nokia Group companies at December 31, 2007 — (Continued)
A complete list of subsidiaries and associated companies is included in Nokia’s Statutory Accounts.
35. Risk Management
General risk management principles
Nokia’s overall risk management concept is based on visibility of the key risks preventing Nokia from
reaching its business objectives. This covers all risk areas: strategic, operational, financial and hazard
risks. Risk management at Nokia is a systematic and proactive way to analyze, review and manage
opportunities, threats and risks related to Nokia’s objectives rather than to solely eliminate risks.
The principles documented in Nokia’s Risk Policy and accepted by the Audit Committee of the Board
of Directors require risk management and its elements to be integrated into business processes. One
of the main principles is that the business or function owner is also the risk owner, however, it is
everyone’s responsibility at Nokia to identify risks preventing us from reaching our objectives.
Key risks are reported to the business and Group level management to create assurance on business
risks and to enable prioritization of risk management implementation at Nokia. In addition to general
principles there are specific risk management policies covering, for example, treasury and customer
business related credit risks.
Financial risks
The objective for Treasury activities in Nokia is twofold: to guarantee costefficient funding for the
Group at all times, and to identify, evaluate and hedge financial risks in close cooperation with the
business groups. There is a strong focus in Nokia on creating shareholder value. Treasury activities
support this aim by minimizing the adverse effects caused by fluctuations in the financial markets on
the profitability of the underlying businesses and by managing the balance sheet structure of the
Group.
Nokia has Treasury Centers in Geneva, Singapore/Beijing and New York/Sao Paolo, and a Corporate
Treasury unit in Espoo. This international organization enables Nokia to provide the Group companies
with financial services according to local needs and requirements.
Treasury activities are governed by policies approved by the CEO. Treasury Policy provides principles
for overall financial risk management and determines the allocation of responsibilities for financial
risk management in Nokia. Operating Procedures cover specific areas such as foreign exchange risk,
interest rate risk, use of derivative financial instruments, as well as liquidity and credit risk. Nokia is
risk averse in its Treasury activities.
(a) Market Risk
Foreign exchange risk
Nokia operates globally and is thus exposed to foreign exchange risk arising from various currency
combinations. Foreign currency denominated assets and liabilities together with expected cash flows
from highly probable purchases and sales give rise to foreign exchange exposures. These transaction
exposures are managed against various local currencies because of Nokia’s substantial production and
sales outside the Eurozone.
According to the foreign exchange policy guidelines of the Group, which stays the same as in the
previous year, material transaction foreign exchange exposures are hedged. Exposures are mainly
hedged with derivative financial instruments such as forward foreign exchange contracts and foreign
exchange options. The majority of financial instruments hedging foreign exchange risk have duration
F65
Notes to the Consolidated Financial Statements (Continued)