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SAAB ANNUAL REPORT 2011 65
ADMINISTRATION REPORT > RISKS AND RISK MANAGEMENT
Long-term customer projects
Management of long-term customer projects involves risks. Saab’s
operations entail complex development projects on the leading
edge of technology where the competitive situation is complex.
Success depends on the ability to oer cost-eective high technol-
ogy solutions, though also 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 projects is
that Saab will be unsuccessful in meeting customer requirements,
as a result of which the commitment is not fullled.
Management of long-term customer projects
A majority of all long-term customer projects contains signicant
development work, which is associated with risks. Before a contract
is entered into with a customer to supply a product, solution or ser-
vice, a thorough analysis is always done of the conditions and risks
associated with the delivery using an established process within
Saab for customer contracts.
Periodic reviews are subsequently made of the project during its
implementation stage using the same process. An important aspect
is to identify and assess risks, then take the measures needed to
mitigate them with the help of a risk assessment method.
e Group applies the percentage-of-completion method to rec-
ognise revenue from long-term customer projects. An estimation of
total costs is critical to revenue recognition and provisions for loss
contracts as well as valuating inventories. e outcome of technical
and commercial risks may aect income.
A review was made of the project management process in 2010,
and we are now working continuously to improve this process and
ensure its implementation.
Environmental risks and liabilities
e most important environmental risks are improper manage-
ment of hazardous chemicals, res in buildings and plants, and soil
contamination. For more information on environmental risks and
liabilities, see Note 48.
Management of environmental risks and liabilities
e operations in Linköping and Karlskoga are subject to Europe’s
Seveso law, which is designed to reduce risks in connection with the
large-scale use of chemicals. Against this backdrop, we have intro-
duced strict routines for risk assessment, supervision and control of
chemicals for the entire Saab Group. Strict routines are also applied
to purchases of chemical products. Health and environmental
information on chemical products is available in the Group’s chemi-
cal data system.
Saab works actively to assess and minimise re risks in its opera-
tions. Since a re in a production facility can cause extensive
environmental damage to the local area, eective re prevention is
an important part of the eorts to reduce environmental risks.
We analyse our operations and properties around the world to as-
sess Saab’s risk exposure resulting from soil contamination.
When a contaminated area is identied, liability is determined
and an overall risk assessment is made. Information on contami-
nated 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).
Divestment of the leasing portfolio
Saab decided in 1997 to discontinue the manufacture of turboprop
aircra.
As with other manufacturers, Saab had a business model that
included lease nancing in connection with aircra sales on the
market. e risk in the portfolio is that Saab is unable to lease out
the aircra. e impact on Saab’s protability could be negative if
the aircra are not being used.
Management of risks in connection with leasing operations
Saab’s direct risk-taking in the leasing eet has been managed
primarily through various types of insurance. e leasing eet is
expected to be divested by 2015. Until then, Saab will manage the
operations in accordance with the terms of its insurance.
Saab’s leasing portfolio at 31 December 2011 consisted of 82
turboprop Saab 340 and Saab 2000 aircra. Of the portfolio, 42
are nanced through US leverage leases. Rents from these leases
are insured through e Swedish Export Credits Guarantee Board
(EKN). 40 aircra are nanced internally and recognised as assets
in the statement of nancial position.
Reserves in the statement of nancial position related to the
leasing portfolio and provisions for commitments associated with
regional aircra are considered sucient to cover remaining risks.