Risks and uncertainties
All business operations involve risk – managed risk-taking is a condition of maintaining a sustained favorable profitability.
Risk may be due to events in the world and can affect a given industry or market. Risk can be specific to a single company. At the Volvo Group work is carried out daily to identify, measure and manage risk – in some cases the Group can influence the likelihood that a risk-related event will occur. In cases in which such events are beyond the Group’s control, the Group strives to minimize the consequences.
AB Volvo has, for more than five years, worked with enterprise risk management (ERM), which is a systematic and structured process to identify, understand, aggregate, report and mitigate the risks that might threaten Group strategic objectives. The aim of ERM is to improve business performance and optimize the costs of managing risk; i.e. protecting and enhancing the Volvo Group’s enterprise value. ERM contributes to meeting the high standards of corporate governance expected from the Group’s stakeholders and is looked upon as an integral part of good corporate governance as reflected in the Swedish Corporate Governance Code.
The risks to which the Volvo Group are exposed are classified into three main categories:
External-related risks – such as the cyclical nature of the commercial vehicles business, intense competition, changes in prices for commercial vehicles and government regulations.
Financial risks – such as currency fluctuations, interest level fluctuations, market value of shares or similar instruments, credit risk and liquidity risk.
Operational risks – such as market reception of new products, reliance on suppliers, protection of intangible assets, complaints and legal actions by customers and other third parties and risk related to human capital.