Structured process for risk management
Risk assessments are carried out regularly in Latour’s day - today operational activities. Every year, a coherent and structured analysis is performed of the risk exposure in the company and the aggregate investment portfolio. This analysis assesses each business area on the basis of a number of external and internal factors. External factors include business cycles, environmental impact and political decisions. Internal factors are financial risk and risks connected to IT structure and management, as well as customer, competition and supplier trends and developments, the company’s position as regards sustainability, and analysis of alternative technologies that may pose a risk in the future. The identification and assessment of climate-related risks is integrated into the overall risk management at Latour. The environmental and climate perspective takes both acute and long-term risks into account, and includes environmental, political, regulatory, technological, market and reputational risks. The risk analysis is divided into financial, industrial and geographical perspectives.
Latour’s investment portfolio companies are analysed from financial, industrial and geographic perspectives. The primary supervision of sustainability-related risks and opportunities takes place at the regular Board meetings in which Latour’s Board representative is involved. Latour’s ambition is to continue to discuss climate-related risks and opportunities related to the financial impact at the listed companies through the work of the Board.
When both of the portfolios have been analysed, a balanced risk assessment is performed for Latour’s total portfolio.
An important risk exposure that was identified from an investment portfolio perspective is the fact that many holdings have customers in construction-related sectors. However, construction-related sectors have multiple dimensions as described in the Directors’ Report.
From a financial perspective, another potential risk is the need for new share issues in the larger listed holdings. However, the risk of defensive new share issues or crisis issues is considered low at present. Offensive new share issues for expansion are not considered a risk. They are considered the same as any other investment opportunity.
Latour’s policy is that it will own high-quality, sustainable companies with long-term, sound profitability, and minimise risks by investing in product development, focusing on quality in internal processes, maintaining cost awareness and ensuring access to competent employees and managers. Latour stipulates high demands in association with acquisitions and only invests in companies that meet Latour’s sustainability requirements. Latour’s business development team is responsible for ensuring that sustainability is an integral
factor in acquisition analyses.