The Group is exposed to various financial risks through its operations: currency risk, interest risk, credit risk and liquidity risk. Ongoing risk management is managed by a central finance department pursuant to adopted policies and guidelines. The finance department evaluates and hedges financial and other risks in collaboration with other Group operating units. The Board has prepared policies for overall risk management and financial management.
The Group is active only in Sweden but is exposed to currency risks that arise from currency exposures pertaining to the purchasing of specialised equipment and printing of lottery tickets, as well as the sale of licenses for the responsible gaming tool PlayscanTM. The exposure is to EUR, USD, as well as CHF and GBP. Currency risk arises only through future business transactions when the Group does not have any assets or liabilities in currencies other than SEK nor any net investments in foreign operations.
The Group’s finance policy requires that it handle currency risk against the functional currency by using currency futures. This means that 100% of the contracted currency flows is to be hedged when the contract is signed. Moreover, contractual flows are hedged when the exact magnitude of the future payment flow is not set in conjunction with the hedging occasion, but can be forecast with considerable certainty. Planned investments that involve significant insecurity, such as with regard to the currency and size of the flow, are not to be hedged before the contract is signed.
The Group’s transaction exposure expressed in the equivalent amounts in SEK million is allocated among the following currencies:
| Currency | 2012 | 2011 |
| EUR | 129.0 | 109.0 |
| USD | 5.9 | 12.6 |
| CHF | 1.0 | 1.1 |
| GBP | 1.0 | 6.3 |
| Total | 136.9 | 129.0 |
As more or less all consolidated revenue and expenses consist of payments in SEK and the currency risk pertaining to future business transactions is covered by futures, the remaining currency risk is negligible. Changes in the value of the Group’s reporting currency in relation to other currencies have thus not had any short-term impact on the Group’s earnings.
The Group gauges and follows up currency risks through the control and reporting of net exposure in each currency.
A sensitivity analysis of a momentary change in exchange rates by ± 10% on the balance-sheet date demonstrates that a decline in the exchange rate of 10% vis-á-vis the SEK would entail a negative impact on the profit of SEK 14 million.
| Currency | Net position 31 Dec. 2012 |
Value change –10 % |
Value change +10 % |
| EUR | 129.0 | 116.1 | 141.9 |
| USD | 5.9 | 5.3 | 6.5 |
| CHF | 1.0 | 0.9 | 1.1 |
| GBP | 1.0 | 0.9 | 1.1 |
| Total | 136.9 | 123.2 | 150.6 |
The Group’s interest risks pertain to interest rate fluctuations related investments in index-linked treasury bonds and surplus liquidity investments. Index-linked treasury bonds are used to hedge the Group’s commitments to winners in the Triss Månadsklöver lottery. Svenska Spel pays a nonrecurring amount to an independent administrator for every win. This payment is based on a present value calculation of future winnings payments at the current rate of interest on the Swedish index-linked treasury bond market. The payment is adjusted to cover future payments to the winner. The liability to winners is upwardly adjusted annually according to the Consumer Price Index, CPI, trend. To manage interest-rate risk relating to index-linked treasury bonds, it is the responsibility of the manager to ensure that the interest rate sensitivity of an investment in the asset, index-linked treasury bonds, is the same as the liability to the winner is, and that the portfolio’s interest rate sensitivity to index-linked treasury bonds corresponds to that of the liability as far as possible. The Group’s overall interest risk associated with assets and liabilities in index-linked treasury bonds is deemed to be negligible.
A small portion of the Group’s cash and cash equivalents is invested in financial instruments that largely comprise zero-coupon bonds and prime commercial paper, which are held to maturity.
Credit risk refers to the risk that business partners cannot meet their financial obligations. As gaming may not be pursued using credit, which means consolidated revenue consists exclusively of cash transactions, credit risk in Group operations is limited. Exposure to credit risk arises in funds generated on an ongoing basis at retailers, associations and restaurants who sell the Group’s range of games and lotteries on an assignment basis. Credit risk also arises in the investment of the Group’s surplus liquidity in bank accounts or in the purchase of interest-bearing securities. Exposure to the Swedish State arises in conjunction with the value hedging of future winnings for the Triss Månadsklöver lottery as a result of the holding of Swedish index-linked treasury bonds and in connection with advance payment of forecast annual dividends to the Swedish National Debt Office.
There are detailed procedures for the approval of gaming retailers and restaurants, and they are based on stringent requirements for and the risk assessment of retailers. Funds are collected weekly by autogiro. Svenska Spel also has a well-functioning procedures for controlling abnormal cash flows among retailers. In the case of retailers who do not pay on time, measures are taken to hedge payment flows by requesting collateral during the period of the retailer agreement and imposing short invoice-to-payment periods on the retailer. There is a set limit structure for the investment of surplus liquidity that entails that investment may be made with counterparties with a credit rating equal to or higher than A according to Standard & Poor’s credit rating. Instructions also limit the size of the investment with each institution.
| Maximum credit exposure | 31 Dec. 2012 | 31 Dec. 2011 |
| Index-linked treasury bonds, Swedish State | 1,677 | 1,685 |
| Lending to credit institutions | 1,693 | 2,264 |
| Bonds and commercial paper | 2,180 | 1,145 |
| Accounts receivable and other receivables | 608 | 538 |
| Set-off, Swedish National Debt Office | 1,200 | 1,200 |
| Total | 7,358 | 6,832 |
Liquidity risk is defined as the risk that the Group will not have access to cash and cash equivalents to be able to make timely payments of foreseen and unforeseen commitments or that financing can only be gained at considerable cost. Liquidity risk has historically been low and each year the Group accumulates substantial amounts of cash and cash equivalents and non-restricted equity that are paid annually in their entirety to the owner.
Financial liabilities consist of unpaid profits, funded winnings and supplier liabilities. The liquidity risk in financial liabilities pertains to the Group having insufficient cash and cash equivalents to be able to pay unpaid winnings due to winners. This risk is considered negligible as most games and lotteries are based on an allocation of funds among participants in the game. As gaming may not be pursued using credit, the funds to be allocated among participants in the game or lottery are available in the form of cash at the time the game or lottery closes. Winnings in the Triss Månadsklöver are paid for up to 25 years, apart from certain campaigns that may lead to winnings being paid out for up to 50 years. This lottery is administrated by a third party and based on funds being paid for each win to the administrator to cover future payments to the winner.
To minimise liquidity risk, the Group works proactively in matching asset maturities with anticipated payout dates.
The table below shows the maturity structure for the Group’s financial liabilities. The amounts shown in the table are the contractual, undiscounted cash flows.
| Within | Within | Later than | ||
| 31 Dec. 2012 | 1 year | 1–5 years | 5 years | Total |
| Unpaid winnings | 518 | 585 | 828 | 1,931 |
| Of which Triss Månadsklöver | 162 | 582 | 828 | 1,572 |
| Trade liabilities and other current liabilities | 504 | — | — | 504 |
| Of which currency futures | — | — | — | — |
| Settlement funds | 243 | — | — | 243 |
| Funded winnings | 441 | — | — | 441 |
| Other non-current liabilities | — | 17 | 15 | 32 |
| Total | 1,706 | 602 | 843 | 3,151 |
| Within | Within | Later than | ||
| 31 Dec. 2011 | 1 year | 1–5 years | 5 years | Total |
| Unpaid winnings | 501 | 560 | 859 | 1,920 |
| Of which Triss Månadsklöver | 157 | 560 | 855 | 1,572 |
| Trade liabilities and other current liabilities | 498 | — | — | 498 |
| Of which currency futures | 1 | — | — | 1 |
| Settlement funds | 136 | — | — | 136 |
| Funded winnings | 285 | — | — | 285 |
| Other non-current liabilities | — | 21 | 15 | 36 |
| Total | 1,420 | 581 | 874 | 2,875 |
