Outokumpu operates in accordance with the risk management policy approved by the company's Board of Directors. This defines the objectives, approaches and areas of responsibility in the Group's risk management activities. As well as supporting Outokumpu's strategy, the aim of risk management is identifying, evaluating and mitigating risks from the perspective of shareholders, customers, suppliers, personnel, creditors and other stakeholders
Risk management organization
The Board of Directors carries ultimate responsibility for risk management within Outokumpu. The CEO and members of the Leadership Team are responsible for defining and implementing risk management procedures, and for ensuring that risks are both properly addressed and taken into account in strategic and business planning.
Outokumpu's Risk Management Steering Group, led by the CFO, is a governing body for risk management in Outokumpu. Business Areas and Group functions are responsible for managing risks connected with their own operations. Auditors and Internal Audit monitor risk management processes, and the Risk Management Steering Group, the Board's Audit Committee and the Board of Directors review both key risks and actions taken to manage these risks on a regular basis. Treasury and Risk Management function supports implementation of Outokumpu's risk management policy, facilitates and coordinates risk management activities, and prepares quarterly risk reports for management, Board's Audit Committee and Auditors.
Risk management process
Outokumpu has defined risk as anything that could have an adverse impact on achieving the Group's objectives. Risks can therefore be threats, uncertainties or lost opportunities connected with current or future operations. Outokumpu's appetite for risk and risk tolerance are defined in relation to earnings, cash flows and capital structure. The risk management process is an integral part of the overall management processes and it is divided into four stages: risk identification, evaluation/ prioritization, mitigation and reporting. Risk management process in Outokumpu is two-fold, including a top-down approach to manage the Group's key risks and a bottom-up approach focusing on the operational level.
Within Outokumpu, the risk management process is monitored and controlled at different organizational levels in a systematic manner. Regular risk updates are carried out to capture relevant information and to ensure that the process is operating in an uninterrupted manner. The monitoring and analysis of results and risk updates also ensure that accurate information is provided both internally – to Business Area management teams and members of the Leadership Team – and externally to parties such as shareholders and other stakeholders.
Focus areas 2016
The focus in risk management was to secure the business plan by robust risk management activities, including actions in safety, securing liquidity, reducing costs and improving the efficiency and controls of Outokumpu's operations. Outokumpu continued its systematic fire safety and loss prevention audit programs, which also focused on machinery breakdown loss prevention during 2016. In total, more than twenty fire safety and machinery breakdown loss prevention audits were carried out in 2016 using in-house expertise in co-operation with external advisors. In the first quarter of 2016, Outokumpu completed negotiations with its insurance companies regarding the settlement of the machinery breakdown incident at its Calvert mill in the US back in 2014. No material operational risks realized during 2016.
Outokumpu obtained a rating from Moody's in the first quarter of 2016. Rating was supported by improvement in profitability and free cash flow.
In the second quarter, Outokumpu issued a EUR 250 million senior secured bond, to extend the maturity profile while also addressing the refinancing of 2017 debt maturities.