Kesko's year 2007

126 Kesko's year 2007
egy are identified, and personnel plans are drawn up on that basis. Kesko's
employer image is redefined by systematic internal and external
communications and stakeholder cooperation.
Continuity of operations and information security
The trading sector is characterised by increasingly complicated and long
supply chains and their dependency on information systems, telecommunications
and external service providers. Disturbances in the supply
chain can cause major losses in sales and profit. These problems may be
reflected to the customer in that there are no products available in the
store or the store is closed. Kesko has continuity management projects
underway which aim to secure undisturbed critical operations and a sufficiently
fast recovery after a serious disturbance.
The importance of information in business operations is increasing
all the time. The requirements of stakeholders and the legislation to safeguard
the handling of information have grown. Confidentiality of customer
and employee information, and business secrets is protected with
up-to-date practices and information security solutions.
Legislation, agreements and ethical principles
Compliance with legislation, agreements and Kesko's ethical principles is
an important basic value. Non-compliance may result in fines, compensation
for damages and other financial losses, and a loss of confidence or
reputation. The Group has specific Compliance programmes to avoid this.
Self-assessments are made in matters concerning competition legislation.
An essential issue in the chain agreements between Kesko and the
retailers is finding solutions for the high-quality delivery of customer
promise and commitment to the chain business. The efficient steering of
chain operations is, to some extent, complicated by interpretations of
competition legislation.
One of the goals of Kesko's corporate communications is to produce
and publish reliable information at the right time. If some information
published by Kesko proved to be wrong or a release failed to meet regulations,
this may result in investors and other stakeholder groups losing
confidence and in possible sanctions.
Litigations
No major litigations are pending, and the Board of Directors is not aware
of any other legal risks that would have a material effect on the Group's
performance.
Other risks
Damage, accidents and crimes are prevented with uniform practices and
cost-efficient safety precautions. Financial losses and interruptions in
operations are covered with Group-wide and appropriate insurance,
revised on a regular basis.
Note 46
Related party transactions
The Group's related parties include its directors (the Board of Directors,
the Managing Director and the Corporate Management Board), subsidiaries,
associates, joint ventures and the Kesko Pension Fund. The subsidiaries,
joint ventures and associates are listed in a separate note.
The following transactions were carried out with related parties:
Sales of goods and services
€ million
Sales of goods
2007 2006
Associates 0.0 0.3
Board of Directors and management 24.1 25.9
Other related party 4.6 0.0
28.7 26.2
Sales of services
Associates 0.7 1.6
Board of Directors and management 1.8 3.0
Kesko Pension Fund 1.5 1.2
4.0 5.8
The related party transactions disclosed include those transactions with
related parties that are not eliminated in the consolidated financial
statements.
Among associates consolidated using the equity method, a property
owned by Valluga-Sijoitus Oy has been leased for the Group's use. Vähittäiskaupan
Takaus Oy and Vähittäiskaupan Tilipalvelu Oy sell their services
to Kesko's and K-retailers' retail companies. The other associates
mainly include business property companies which have leased their
premises and real estate to the Kesko Group. Associates that operate as
mutual real estate companies have been consolidated in the financial
statements in proportion to their ownership interest.
Three members of Kesko's Board of Directors act as K-retailers. The
Group companies sell goods and services to enterprises controlled by
them.
The Kesko Pension Fund is a separate legal entity which manages and
holds in trust part of the pension assets of the Group's employees in Finland.
Pension assets include Kesko Corporation shares in the amount of
€130.2 million. Real estate and premises owned by the Pension Fund have
been leased to the Kesko Group, which has subleased most of them to
retailers. In 2007, the Kesko Group paid a total amount of €45.6 million
(€18.8 million) in contributions to the Pension Fund.
The sales of goods and services to related parties have been carried
out on general market terms and conditions and at market prices.
Purchases of goods and services
€ million
Purchases of goods
2007 2006
Associates 0.4 14.2
Board of Directors and management 2.9 2.4
Total 3.3 16.6
Purchases of services
Associates 1.9 7.2
Board of Directors and management 0.0 0.1
Pension Fund 0.0 0.1
Total 1.9 7.4
In addition, other operating expenses include rents paid by the Kesko
Group to the Kesko Pension Fund in a total amount of €18.4 million
(€15.6 million).