As a financier supplementing the financial market, Finnvera takes higher credit risks than financiers operating on commercial terms. Domestic financing and export credit guarantees are based on specialised Acts that define the grounds for Finnvera’s risk-taking.
The State of Finland compensates Finnvera for some of the losses that arise in domestic financing. Using revenues from its operations, Finnvera must cover its own share of any domestic credit and guarantee losses arisen from one economic cycle to the next. In regard to export credit guarantees, both the State Guarantee Fund and the State of Finland secure foreign risks pertaining to the country, bank or enterprise. In the long term, profits from operations must cover the expenses and guarantee losses arising from operations. Finnvera’s goal is to take credit risks in a controlled manner in line with its operating principles, and to hedge against other risks or to minimise them.
Owing to the nature of Finnvera’s business, risk management plays an important role in maintaining the company’s risk-taking capacity and in reaching its financial targets over the long term.
Finnvera’s Board of Directors and upper management are responsible for arranging and organising internal control and risk management. The Board approves decision-making powers, the principles of risk management and the outlines for risk-taking. In keeping with the company’s strategy, the outlines ensure a controlled increase in risk-taking, especially as concerns starting and growth enterprises. For its part, risk management ensures prerequisites for implementing the company’s strategy.
Domestic risk-taking is guided through office-specific risk-taking goals, taking into account, for instance, differences in the clientele and operating environment of each office. The risk-taking goals are based on the targets set for Finnvera vis-à-vis its ownership policy, profitability and effectiveness. Risk-taking pertaining to export credit guarantees is guided by means of the country and guarantee policies ratified by the Board of Directors.
Working independently of Finnvera’s business areas, the Risk Management Unit is responsible for the development of policy, methods and guidelines for risk management, and for the monitoring of the company’s risk standing. The Risk Management Unit reports to the Managing Director. Internal auditing monitors and ensures that the guidelines approved by the Board are followed. Practical measures associated with risk management are part of the company’s day-to-day management and are carried out by the entire Finnvera organisation and all Group companies.