Risks are defined as uncertainties that can impact Svenska Spel’s ability to accomplish its mandate and achieve its goals. By working continuously and systematically with risk management, risks are identified in a timely fashion, necessary measures identified and sound internal governance and control secured.
At Svenska Spel, the overall corporate risk-management process is integrated with the regular process for business planning and operational follow-ups. The Company’s mandate serves as the foundation for risk management and based on this, goals and activities are specified in an overall business plan, and in detailed plans for each business area and operating area. Risks are identified and managed at various levels within the Company.
The risk management process at Svenska Spel is as illustrated below:
Svenska Spel relates its risks to the four strategic target areas: Customers, Responsibility, Employees and Professionalism. In each respective area operating environment risks, business risks, operational risks, financial risks and regulatory and compliance risks are identified. A single risk can naturally influence one or more of Svenska Spel’s target areas.
Operating environment risks are defined as external risks to which Svenska Spel is exposed in its business environment, for example changes in the industry structure and the properties of the gaming market in terms of both competitors and customers.
The single largest risk in this area is that a decision on re-regulation of the gaming market is further delayed and that during that period Svenska Spel is subjected to permit restrictions that negatively impact the Company’s prerequisites for fulfilling its mandate. In particular together with increased competition from unregulated gaming companies that can market themselves and act freely in the market. In addition to this, the Company’s ability to meet changes in customers’ gaming behaviour is being tested in cases where the demand for new games and technology set high requirements for Svenska Spel. Svenska Spel maintains an ongoing dialogue with its owner and other stakeholders to prepare for any changes in terms and conditions, and to be able to contribute insight and knowledge ahead of potential re-regulation. These risks impact the target areas: Professionalism, Customers and Responsibility.
Business risks are defined as risks that are related to how the business is operated and how Svenska Spel competes in the market. The Company’s most important assignment is to deliver attractive customer experiences in responsible forms. A critical risk is that Svenska Spel, despite being at the forefront in terms of responsible gaming, is unable to reach the desired goal of being a clear role model for the market. During the year, a number of key initiatives were implemented to create a standardised and consistent Group-wide approach to responsible gaming that aims to further strengthen customer protection. The above, in combination with Svenska Spel lacking a permit to operate a product in demand with certain customers, namely an online casino, the unregulated gaming companies extensive investments in advertising and the exposure of bonuses all lower the ability of Svenska Spel to channel customers to Svenska Spel in line with the Company’s mandate. In particular, this impacts the ability to reach targets defined under the Responsibility target area.
Operational risks pertain to internal risks that are related to how the business is operated in the aim of achieving the established goals. A shift in customers’ gaming behaviour toward faster and more internet-intensive games and rapid development, particularly for unregulated gaming companies, poses a challenge for Svenska Spel. Accordingly, maintaining a high pace of development is a prioritised area to be able to offer customers attractive services and products. This sets high requirements on the technical platform as well as on employees and their skills. Risks in this area impact the Customers and Employees target areas.
Svenska Spel operates in a regulated market within an extremely complex regulatory and condition-governed context. Accordingly, the greatest challenge in this risk area is to ensure that Svenska Spel has clear and reliable processes and procedures to ensure that we comply with the applicable laws and regulations arising from lottery legislation and, in that connection, with related conditions or other legislation. The risks of breaching the conditions are many and have an impact on all target areas.
The financial risks including interest-rate, credit and liquidity risks are limited. The Group has strong liquidity and no interest-bearing liabilities. The Group has negligible exposure to exchange-rate and currency risks, since its sales and purchases are essentially conducted in SEK. The financial risks primarily affect the Professionalism target area. The financial risk management for investing surplus liquidity is governed by Svenska Spel’s Finance policy. For other information, please refer to Note 10.