Kesko's year 2007

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62 Kesko's year 2007 former Corporate Executive Vice President, Deputy to the President and CEO, renounced his membership in the Corporate Management Board as of 1 June 2007. In 2007, the members of the Corporate Management Board, excluding the President and CEO, received* €1,378,699 (€1,358,570 in 2006) in salaries, €100,172 (€117,879) in fringe benefits and €218,210 (€174,804) in bonuses, €1,697,081 (€1,651,253) in all. During 2007, the members of the Corporate Management Board, excluding the President and CEO, sold 5,000 stock options 2003D, 46,000 stock options 2003E and 90,500 stock options 2003F. At the end of the year, they had a total of 13,000 stock options 2003E, 56,500 stock options 2003F and 145,000 2007A stock options, the subscription period for which will begin on 1 April 2010. Further information about Kesko’s Corporate Management Board is available on pages 68–69 and at www.kesko.fi. Auditing The 2007 Annual General Meeting of Kesko elected one auditor for the company: PricewaterhouseCoopers Oy, Authorised Public Accountants, with Pekka Nikula, APA, as the auditor with principal responsibility. The fees paid in 2007 to firms that belong to the Pricewaterhouse- Coopers chain in Finland and other countries for auditing Kesko Group companies totalled €786,815 (€1,122,780 in 2006), while the fees paid for consulting services, including tax and IFRS consultation, totalled €363,201 (€411,420). In some Kesko Group companies, auditing is carried out by auditors other than those belonging to the Pricewaterhouse- Coopers chain. The amount of auditing fees paid to all auditors totalled €905,351 (€1,271,860) in 2007. Insider administration Kesko’s insider regulations Kesko’s Board of Directors has confirmed Kesko’s insider regulations for permanent and project-specific insiders. They take into account the regulations of the Market Securities Act and the standard on insider holdings and insider registers issued by the Financial Supervision Authority. The contents of the regulations also correspond with the insider rules of the OMX Nordic Exchange Helsinki. Kesko’s insider regulations have been distributed to all insiders. Kesko’s permanent insiders and insider registers In accordance with the Securities Markets Act, Kesko’s permanent public insiders include Kesko’s Board members, the President and CEO, and the auditor with principal responsibility in the firm of auditors. Kesko Corporation’s Board of Directors has also stipulated that, in addition to the President and CEO, other members of the Corporate Management Board are regarded as the company’s permanent public insiders. All permanent public insiders and the statutory information about them, their related persons and the corporations that are controlled by related persons or in which they exercise influence, have been entered in Kesko’s register of public insiders. Other permanent insiders of Kesko include such persons working in positions determined by the Board of Directors, who in their duties receive insider information on a regular basis and who are thus entered in the company’s own, non-public insider register. Kesko’s company- specific insider register is divided into individual registers that consist of permanent insiders and of possible insider projects and persons participating in their preparation. Monitoring The Group’s Legal Affairs Unit monitors the compliance with insider regulations and maintains the company’s insider registers in cooperation with the Finnish Central Securities Depository Ltd. The Legal Affairs Unit sends, at regular intervals, permanent public insiders an extract of the information in the insider register and monitors the permanent insiders’ compliance with trading restrictions. Kesko’s permanent insiders may not acquire or transfer securities issued by the company, including securities or derivative financial instruments entitling to them, during 21 days prior to the publication of interim financial reports and during 28 days prior to publication of annual financial statements. These dates of publication are announced annually in advance by stock exchange release. Furthermore, the persons involved in possible insider projects may not trade in such securities or derivative financial instruments during the project. Further information about the holdings of Kesko’s permanent public insiders is available on pages 143–144 or see updated information at www.kesko.fi. Stock exchange releases The General Counsel is responsible for ensuring that the rules related to stock exchange releases are observed at Kesko. The Group’s Senior Vice President, CFO is responsible for the financial content of stock exchange releases as well as for investor information. The Corporate Communications and Responsibility Unit produces Group-level communications material and is responsible for providing stock exchange and financial information. In its investor communications, Kesko follows the principle of impartiality and publishes all investor information on its Internet pages in Finnish, Swedish and English. Risk management at Kesko The objective of Kesko’s risk management is to ensure the fulfilment of the Group’s customer promises, the improvement of shareholder value, good profit performance, the ability to pay dividends and the continuation of business. Efficient risk management is a competitive advantage for Kesko. In the Kesko Group, a risk has been defined as any kind of uncertainty factor that may lead to: ●● ●● a failure to exploit business opportunities, events or reasons which prevent or hinder the attainment of objectives or cause other unwanted consequences. 1 COSO ERM refers to the Enterprise Risk Management (ERM) – Integrated Framework published by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in September 2004. The framework defines essential ERM components, suggests a common ERM language and provides clear direction and guidance for enterprise risk management. *Juhani Järvi is included in the year 2007 figures until 31 May 2007. In the year 2006 figures, Juhani Järvi is included for the whole year.
Year 2007 Divisions The Group Financial statements Further information The risk management policy approved by the Board of Directors guides risk management in the Kesko Group. This policy is based on the COSO ERM Integrated Framework and the Corporate Governance Recommendation. The policy defines the objectives, principles, organisation, responsibilities and key practices of risk management. Risk management is an essential part of management and day-to-day operations. The risk management process generates information about risks and the status of management responses. It leads, if necessary, to remedial actions or the consideration of changes in strategy. Principles of risk management The Kesko Group’s risk management system is based on the following principles: ●● ●● ●● ●● ●● ●● ●● ●● ●● Conscious and carefully evaluated risks are taken in selecting strategies, e.g. in expanding business operations, in enhancing market position and power, and in creating new business. Financial, operational and damage/loss risks are avoided or reduced. A safe shopping environment for customers and product safety is ensured. A safe working environment is created for employees. Information about risks and risk management is provided to stakeholders. Opportunities for unhealthy phenomena, crime or malpractice are minimised through operating principles, controls and supervision. The continuity of operations is ensured by safeguarding critical functions and essential resources. Crisis management, continuity and disaster recovery plans are prepared in case any risks are realised. The costs and resources involved in risk management are in proportion to the obtainable benefits. Risk management organisation and responsibilities The business management is responsible for risk management in practice. Persons responsible for risk management have been appointed in the divisions to coordinate and report on risk management activities. Kesko Food and Rautakesko also have a risk management function of their own, which supports the implementation of risk management in the division. The Corporate Risk Management Unit is responsible for developing and maintaining risk management tools, introducing best practices to the Group and reporting on risk management to the Group management. The Unit is also responsible for Group-level principles concerning non-life insurances, for insurance programmes and coordination of non-life insurances. Kesko has a Risk Management Steering Group, which is chaired by the President and CEO, and has representatives of various divisions and Group units as members. The Steering Group approves risk management procedures and guidelines, and discusses and assesses the Group’s risks and the implementation of risk management responses. Risks are reported to the Audit Committee of Kesko’s Board of Directors on a regular basis. Kesko Corporation’s Board of Directors considers the major risks and assesses the functioning of risk management at least once a year. The Internal Audit Department assesses the functioning of risk management annually and reports on the level of risk management to Kesko’s Board of Directors’ Audit Committee. 63 Risk management developments in 2007 Systematic implementation of the new risk management policy continued in the business divisions and units. Assessment and reporting of risks and their management activities have been enhanced and specified. The divisions have assessed the risks in connection with the strategy cycle and prioritised them according to their criticality and management level. The impact of risk materialisation has been evaluated in euros. The division parent companies’ risks and their management activities have been discussed by the companies’ management. The divisions have updated their risk assessments quarterly, and separate risk analyses have been made for major projects. Group units, such as Corporate Accounting, Treasury, Corporate Communications and Responsibility, Legal Affairs and IT Management, have analysed the risks threatening the objectives and their management. On the basis of the Divisions’ and Group units’ risk analyses, the Corporate Risk Management Unit has prepared summaries of major risks and their management on a quarterly basis for Kesko Corporation’s Board of Directors’ Audit Committee. Kesko’s Corporate Management Board has analysed and prioritised the major risks of the Group. The Group has confirmed the new information security policy, principles of continuity management, loss prevention principles and directions concerning the inspection and reporting of malpractice. Their implementation has started and, for example, malpractice is regularly reported to senior management and the Board of Directors’ Audit Committee. Quarterly reports have also been prepared for the management on topical issues and best practices related to risk management. Kesko has Group-level cooperation networks in risk management, and corporate and information security. They aim to increase risk awareness, leverage expertise and share best practices across division and country boundaries. Risk management emphases in 2008 Key issues in operative risk management include improving continuity management and the efficiency of loss prevention. The new deviation reporting system produces information about disturbances in operating activities, so as to effectively prevent disturbances in advance. Risks and their management The Kesko Group’s risk analyses have, for example, addressed the following risks and their management in 2007. Delivering the customer promise The price-quality ratio is a key competitive factor. If Kesko does not succeed in this competition, it will not achieve the sales targets. The general cost development can also endanger the implementation of objectives. Enhancing price competitiveness calls for improvements in the efficiency of operations throughout the supply chain from the supplier to the store shelf. There are several programmes underway to improve cost-efficiency and total management of the operations chain,
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Kesko’s year 2007
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Year 2007 the best offers Divisions
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Year 2007 Financial highlights for
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Year 2007 list. In 2008, we intend
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Page 69 and 70: Year 2007 Maarit Näkyvä b. 1953,
Page 71 and 72: Year 2007 Pekka Lahti b. 1955, M.Sc
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Year 2007 Shares and shareholders D
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Year 2007 Latvia Rautakesko A/S Ren
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Year 2007 Logistics is a process in
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