Saab 2014 Annual Report Download - page 55

FINANCIAL RISKS
In its operations, Saab is exposed to various nan-
cial risks. Management of nancial risks is gover-
ned by the Group Treasury Policy established by
the Board of Directors. Saab also has an extensive
pension obligation managed by Saab’s Pension
Fund. Detailed directives and processes are in
place for the operational management of each area.
Overarching responsibility for managing nancial
risks lies with Group Treasury.
Financial risks
Risk Currency risks
Interest risks
Refinancing risk
Credit and counter-
party risks
Commodity risks
Pension
obligation
Risk
manage-
ment
Management of
financial risks is
governed by a
Group Treasury
Policy established
by the Board of
Directors.
See not 41 for
further information.
See below
Pension obligations
e Group’s pension obligations are substantial, as
indicated in note 37. In the calculation of pension
obligations, future pension obligations are dis-
counted to present value. e size of the liability is
dependent on the level of discount rate: a low inte-
rest rate produces a high liability, and vice versa.
Management of pension liability
e predominant plan in Sweden is the ITP plan
under collective agreements between the Confede-
ration of Swedish Enterprise and the Negotiation
Cartel for Salaried Employees in the Private Busi-
ness Sector (PTK). Saab Sweden has three dierent
ways of securing its dened-benet plans: as
liabilities on the balance sheet, in pension funds
or funded through insurance with mainly Alecta.
e Saab Pension Fund, that secured part of the
ITP plan, had assets of MSEK 5,091 (4,595) as of
31 December 2014, compared to an obligation
of MSEK 7,428 (5,793) according to IAS 19, or a
solvency margin of 69 per cent (79).
To manage the pension liability, the Saab Pen-
sion Fund was established in 2006 and capitalised
with the corresponding PRI liability. e Group’s
obligations are calculated on an actuarial basis
each year, aer which a comparison is drawn with
the fund’s assets. Decits may require Saab to con-
tribute additional funds. e Saab Pension Fund’s
objective is a real annual return of at least 4 per
cent on invested capital. e fund invests in inte-
rest-bearing securities, equities and hedge funds.
OPERATING RISKS
A number of signicant areas have been identied
with respect to operating risks, which are
important in assessing the Group’s results and
nancial position.
Development and introduction of new systems
and products
e Group invests heavily in the research and
development of its own products and systems as
well as acquisitions of technology. Its own pro-
ducts mainly include radar systems, command and
control systems, tactical weapons, UAV systems
and electronic warfare systems. One example of
acquired technology is the radar technology obtai-
ned through the acquisition of Ericsson Micro-
wave Systems AB in 2006. Investments in new sys-
tems and products are made aer a strategic and
nancial analysis and assessment of future busi-
ness opportunities.
e risk associated with developing and
introducing new systems and products is that
they will fail to meet market demands and not
yield the return estimated at the time the decision
was made.
Management of development and introduction
of new systems and products
Saab’s new product database, with more than 600
products grouped by product area, was launched
in 2013. In 2015, the focus is on packaging oers
(combinations of products, services tied to pro-
ducts, etc.). e product database is linked to
Saab’s CRM system (Customer Relationship Mana-
gement) and provides strong support for the mar-
ket area organisation. Good packaging facilitates a
dialogue with customers and reduces design costs.
During the year, Saab further improved eciencies
in product development through modularisation.
is means that new customer requirements can
be met more quickly and at a lower cost. One
example is Roquette NG, a next generation
shoulder-launched weapon system for the French
Armed Forces, where Saab's ability to quickly meet
new requirements turned the deal in Saab's favour.
Development costs are capitalised in accor-
dance with established accounting principles.
Amortisation of capitalised development costs is
scheduled over the estimated production volume
or an estimated period of use, though not more
than ten years. Future business opportunities are
periodically reassessed, which can lead to impair-
ment losses. Capitalised development costs are
shown in note 16.
Long-term customer contracts
Management of long-term customer contracts
entails risks. Saab’s operations involve complex
development projects on the leading edge of tech-
nology where the competitive situation is complex.
Our success depends on the ability to oer cost-
SAAB ANNUAL REPORT 2014 – 51