Saab 2014 Annual Report Download - page 56

ADMINISTRATION REPORT
RISKS AND RISK MANAGEMENT
eective high technology solutions and in some
cases on participation in the customer-country’s
economy through various forms of industrial
co-operation.
e risk in managing long-term customer
contracts is that Saab will be unsuccessful in
meeting customer requirements, as a result the
commitment is not fullled or the costs run
signicantly higher.
Management of long-term customer contracts
e majority of all long-term customer contracts
include signicant development work, which is
associated with risk. Every contract with a customer
to supply a product, solution or service is preceded
by a thorough analysis of the conditions and risks
associated with the delivery, based on an internal
process established within Saab for customer
contracts, the Win Business process. is process
includes a comprehensive analysis of the risks in
the project and requirements for managing identi-
ed risks.
During 2014, Saab further improved the pro-
cess, which has been adapted to changes in Saab’s
internal governance and new external demands.
e Win Business process has also been adapted
to the market area organisation introduced in
January 2013. Regular project reviews are conduc-
ted during the project implementation stage using
design reviews, project reviews, decision reviews,
etc. An important element is to identify risks and
assess them and the measures taken to mitigate the
risks with the help of a uniform risk assessment
process.
e Group applies the percentage of comple-
tion method to recognise revenue from long-term
customer contracts. An estimation of total costs is
critical to revenue recognition and provisions for
onerous contracts as well as the valuation of inven-
tories. e outcome of technical and commercial
risks may aect income and cash ow. deliveries
accoring to project plan and milestones is
important to cash ow as payment upon achieve-
ment of milestones. Saab works continuously to
improve this process and ensure its implementa-
tion. In 2014, Saab further implemented and
improved the process. ese improvements will
continue in 2015, including adjustments to new
external and internal demands.
Environmental risks and liabilities
e most signicant environmental risks are the
improper management of hazardous chemicals,
res in buildings and plants, and soil contamina-
tion. For more information on environmental risks
and liabilities, see note 48.
Management of environmental risks and liabilities
e operations in Linköping and Karlskoga, Swe-
den are subject to Europe’s Seveso law, which is
designed to reduce risks in connection with the
large-scale use of chemicals. Saab has therfore
introduced strict routines for risk assessment,
supervision and control of chemicals. Established
routines for safe chemical handling are also used in
other locations where Saab is active. Health and
environmental information on chemical products
is available through the Group’s chemical data sys-
tem, which will be replaced in 2015. In 2014, seve-
ral activities were initiated to meet the anticipated
prohibition on the use of certain hazardous chemi-
cals, according to the REACH chemical legislation.
Preparations were also made to replace the chemi-
cal data system. Saab works actively to assess and
minimise re risks in its operations. Since a re in
a production facility can cause extensive environ-
mental damage to the local area, eective re pre-
vention is an important part of the eorts to reduce
environmental risks. e integration of Saab’s
environmental policy at Saab Kockums AB began
in 2014 and will continue in 2015.
Saab analyses its operations and properties
around the world to assess the Group's risk expo-
sure resulting from soil contamination. If a conta-
minated area is identied, liability is determined
and an overall risk assessment is conducted.
Information on contaminated areas is documented
as it is received. An insurance solution to manage
soil contamination cases has been in place since
2009. Overall risk assessments are made to
determine how operations are aected by climate
change. ese risks are reported within the
framework of reporting for the Carbon Disclosure
Project (CDP).
Compliance risks
e Group has clear guidelines on how employees
shall act in contact with customers and society.
Saab conducts business all over the world and has
relationships with customers and other stakeholders
on every continent. Saab's commitment is to act in
an ethically correct manner in all that is done,
based on current legislation, Saab's Code of Con-
duct and common industry standards. Saab strives
to be a long-term, reliable business partner that
promotes an open and transparent market. e
risk involved when Saab does business is that this
commitment is broken.
Management of compliance risks
Saab's Code of Conduct is based on OECD guide-
lines and the UN Global Compact. All employees
receive Code of Conduct training. A cornerstone
of our compliance work is that every business
transaction and market activity shall be preceded
by a corruption analysis. To facilitate the analysis,
Saab has developed a Corruption Risk Assessment
Tool which helps to single out factors that typically
inuence the risk of corruption. All employees in
the marketing and sales organisation receive train-
ing that stresses the importance of the requirement
that business managers perform a corruption
assessment in connection with every business
transaction. e training also includes knowledge
52 – SAAB ANNUAL REPORT 2014