En grupp pensionärer fikar och umgås

Risk and risk management

Back to Corporate governance

To facilitate proactive minimisation of risk exposure, Humana conducts regular risk analyses. The risks that Humana has identified are classified in four risk categories and all risks have been graded according to probability and impact.

Purpose

Humana’s risk management is aimed at preventing, mitigating or precluding risks from materialising or affecting operations in a negative way. Humana endeavours to effectively identify, assess and manage the Company’s risks. The purpose of Humana’s risk management work can be summarised as follows:

  • to create management and Board awareness about the Company’s risks
  • to create effective governance and control of the business so that the Company can achieve its objectives
  • to provide data and processes that support daily operations
  • to ensure investors and other stakeholders have effective information about the Company’s risk exposure

Risk categories

In their risk analysis, Humana’s management have identified conceivable events, scenarios and activities that could have an impact on the Company’s operations and its ability to achieve defined objectives. These risks have been evaluated and concentrated into a net list of the most relevant risks. The risks have been graded according to a probability and impact perspective. An increased probability of a risk occurring does not always need to be a negative factor. It can also be positive, for example, in cases where the Company believes that the change sharpens requirements, thereby raising standards in the entire industry. The risks are monitored by Humana’s Group management and in the Board’s work. As Humana conducts operations in Sweden, Finland, Norway and Denmark, the assessment is based on the situation in the local markets and is then compiled into a Group-wide risk description.

Humana has decided to classify the identified risks in four risk categories:

A Sector and market
B Services
C Compliance, responsibility and sustainability
D Financial

Sector and market

Sector and market-related risks concern external factors, events and changes in Humana’s markets that could influence the conditions for achieving the Company’s defined objectives. The Company has limited scope to influence these types of risks, but they remain risks that Humana needs to address as a company. There are often two sides to every sector and market-related risk: a downside, i.e., a risk or threat, and an upside, i.e., an opportunity. The sector and market-related risks identified by Humana are set out below:

Increased sector regulation

The care sector is subject to an extensive regulatory apparatus in the form of laws and regulations at the national, regional and local levels. Laws and regulations, with the models varying in Humana’s countries of operation, cover areas such as availability of services, access to services, quality of services, staff qualifications and obligations, and confidentiality rules. Humana works with clear requirement specifications, documentation, quality monitoring and skills development to ensure that the services provided fulfil all requirements.

Risk level
Probability – Medel
Impact – Medel

Comments
Humana is far ahead in this area. The trend is towards an increase in regulations. Regulation of BPA (user-controlled personal assistance) and care services continues to increase, particularly in Norway. In general, we welcome clear regulations that help raise the quality and status of the care sector and benefit quality providers like Humana.
Management
Humana engages in lobbying for increased sector regulation through, e.g., participation on boards and in sector networks, and internal action plans are implemented accordingly.

Political decisions aimed at restricting private welfare providers and other political risks

Certain political parties in the Nordic region are questioning the privatisation of care and support services and advocating restrictions on the ability to run private care companies for profit. The business model for private care companies could be adversely affected by the introduction of legal requirements that limit or prohibit profits or restrict the rate of privatisation or the number of services eligible for privatisation.

Risk level
Probability – Low
Impact – High

Comments
In what is referred to as the January Agreement, the Swedish government of the Social Democrats and Green Party has agreed with the Liberals and the Centre Party that a variety of providers are needed. The government will not therefore draft any bills introducing profit caps for private providers in welfare. In Norway, there is ongoing political debate on whether private care providers in certain segments should be restricted. In Finland, the debate has mainly concerned conditions in welfare, such as staffing.
Management
Regular dialogue with key stakeholders and influencers.

Other political risks

The care sector is affected by the political agenda in every respect. Humana’s operations are funded by the state and municipalities, and policy changes could have consequences for private care providers. Private providers’ opportunities are dependent on political decisions made by municipalities, regions and government authorities. Increasing needs for care services, with an associated increase in costs, are expected to present a challenge to society, both in the short and long term.

Risk level
Probability – Medel
Impact – Medel

Comments
In all our countries of operation, we are exposed to political risks associated with political decisions that affect the care market. Humana has a high level of expertise in care and is also well placed to remain a strong and significant care provider in the event of any changes.
Management
Continuous knowledge-gathering and relationship-building in public affairs and in the Association of Private Care Providers (Vårdföretagarna) and its counterparts in Norway and Finland.

Changes in personal assistance conditions and in the reimbursement model and allowance level

Humana’s Personal Assistance business area receives an allowance from Försäkringskassan and municipalities. The state reimbursement amount is set annually through the budget proposal. The amount for 2020 increased by 1.5 percent, which means another year in which the allowance level is likely to be lower than the personnel cost increase. The state reimbursement level affects profitability in the sector. In January 2019, the LSS inquiry presented its report. The report from the personal assistant inquiry came out in January 2020. The inquiries have not yet resulted in any changes in the conditions for personal assistance. However, several issues related to the policy for defining assistance conditions and the allowance level are under discussion.

Risk level
Probability – Medel
Impact – Medel

Comments
The allowance level for personal assistance remains challenging and new political decisions may affect future margins.
Management
Dialogue with key stakeholders and influencers, and responses to investigations. We work constantly to establish flexibility and manoeuvrability in the organisation to ensure preparedness for significant changes in personal assistance conditions.

Changes in pricing and demand

Prices of publicly funded care services can be set by local, regional and national authorities. This means that the prices are not exclusively controlled by market forces such as supply and demand. A decrease in demand for private care services would have a negative impact on Humana’s business. An increased need for care should bring more demand for care services, but it may also lead to price pressure, as public funds must be allocated to more ecipients. There is also a risk of price pressure due to budgetary constraints, as municipalities’ resources are not growing in pace with needs.

Risk level
Probability – Medel
Impact – Medel

Comments
Demand and the need for government and local authority-funded care is increasing in society. Purchases from private care companies have increased in nominal amounts each year. All Nordic countries are experiencing price pressure due to budgetary constraints.
Management
Continuing focus on high quality and a high degree of specialisation and individualised care to remain competitive.

Services

Operational risks are mainly related to internal factors and events that could adversely affect the Company’s operating activities and ultimately its brand. Humana’s reputation and good standing are key to maintaining the trust of the Company’s customers, clients, buyers and employees. Negative publicity about private care providers or a serious incident within the Group’s operations could have a considerable adverse impact on the Company’s business and earnings. The operational risks identified by Humana are set out below:

Ability to attract employees

Humana is dependent on its ability to attract, engage and retainqualified personnel at market conditions. The Company’s operations are very labour-intensive, with high expertise requirements that vary from business area to business area. In Personal Assistance, the formal expertise requirements are lower, while some of the services offered in Individual & Family require a high level of expertise and specialisation. Humana’s quality is dependent on employees’ ability to make the right decisions and have the right attitude in their daily work. Should the Company fail to attract the right personnel, this could affect its growth opportunities. At the same time, welfare is facing a major recruitment challenge, as the number of children and old people will increase significantly more than the working age population in the coming years.

Risk level
Probability – Medel
Impact – High

Comments
Employee surveys show that employees are happy at Humana. Humana’s scope for recruiting managers remains good. However, the recruitment situation in certain geographical regions and in specific occupational categories varies.
Management
Clear strategy built on Humana’s values, opportunities for training, leadership, autonomy and future career paths in order to attract new employees.

Dependence on permits and correct professional qualifications

Humana’s operations and growth are dependent on the Company’s ability to secure and retain several permits from social services and authorities to conduct care operations. The permits are linked to persons with the right professional expertise. Several of the permits in Humana’s businesses are linked to specific properties. If the businesses are sold or moved, Humana will be required to apply for new permits. Permits could also affect Humana’s ability to move companies within the Group. From 2019, more care areas are required to obtain permits in Sweden. Applications are subject to an assessment, which also looks at ownership and management, and an administrative fee is applied for each permit application made to the IVO (Health and Social Care Inspectorate). Humana’s operations in Finland, Norway and Denmark are also subject to permit.

Risk level
Probability – Medel
Impact – Medel

Comments
The permit processing times of local authorities continue to be long. This means a risk of start-up delays and an associated increase in costs. The permits are linked to relatively few members of management in the Group.
Management
Intensified efforts to be accessible to government authorities, social services and the IVO to facilitate processing times.

Dependence on framework agreements

The framework agreements that Humana enters into to conduct operations under own management contain assumptions on volume, entailing that the scope and volume of the services offered under such framework agreements may be uncertain. If Humana cannot fulfil the requirements stipulated in framework agreements, the agreements may be terminated. As Humana secures long-term leases for premises used in its operations, the Company bears the risk that operating revenue may be lower than its personnel and rental costs associated with the premises. Humana works daily to optimise its occupancy with respect to care placements in the Group’s operations under own management and to match costs effectively.

Risk level
Probability – Medel
Impact – Medel

Comments
With municipalities becoming more professional in their tendering processes, it has become increasingly important to have framework agreements. The assessment is that it will become even more important in the future. Framework agreements can also bring price pressure. Some, but by no means all, of Humana’s operations are conducted under framework agreements.
Management
Focus on high service quality (leading expertise and good therapeutic results), and close work with municipalities.

Future expansion and growth

Humana is a growth company that intends to continue expanding its business through a combination of organic growth and acquisitions. The future success of the Company’s acquisition strategy is dependent on several factors, such as Humana’s financial position, the Company’s ability to identify suitable acquisition candidates, negotiation of the right level of purchase prices and acceptable terms. Future growth is also affected by Humana’s capacity and expertise in running organic projects, attracting customers and ensuring access to appropriate properties. Effective integration of acquisitions into existing operations is also of key importance to Humana. The Company may also encounter business risks, tax risks and economic risks associated with the acquisition and integration of companies. In addition, there are increasing requirements to attract the right employees and ensure sufficient central staffing as the business grows.

Risk level
Probability – Medel
Impact – Medel

Comments
The political situation, fragmented markets, increased sector requirements and underlying growth in most of our sub-markets create opportunities for continuing consolidation and growth.
Management
Careful evaluation and selectivity when making acquisitions, determining organic projects and identifying competent business partners. Focus on effective integration processes. Finding business partners who are effective negotiators and have solid legal and financial skills.

External cyber threats

A cyber threat or cyber security threat is a malicious act aimed at damaging data, stealing data or disrupting digital life in general. Cyber threats include phishing (tricking bank account holders and owners of other electronic resources into disclosing credit card numbers, passwords or other sensitive information), viruses, overload attacks, also referred to as DDoS (Distributed Denial of Service) attacks, ransomware or blackmail programs, and other types of cyber attacks.

Risk level
Probability – Medel
Impact – High

Comments
In recent years, the number of cyber attacks and threats to companies’ information systems has increased greatly. This has also increased the risk of Humana being exposed to cyber attacks.

Management
Continuing focused work on risk prevention, external monitoring, patching of systems, training of users and ensuring that suppliers are doing their job. Monitoring of logs, the threat scenario and external interfaces.


Computer system limitations and unauthorised access to sensitive personal data

Humana handles a large amount of data in the form of personal nformation, social and medical information journals and business-critical information. Breakdowns or disruptions in IT systems, including such caused by sabotage, computer viruses, operator error or software defects, could have a negative impact on the Group’s operations. Humana works systematically to minimise the risk of such disruptions by means of administrative, logical and physical work on IT security.

Risk level
Probability – Medel
Impact – High

Comments
Development of our IT systems and processes is constantly progressing. The assessment is that there is a probability of operational restrictions due to IT and system deficiencies, and efforts are in progress to reduce the risks.

Management
Continuous system development and monitoring and streamlining of systems. Development of competence, systems, and routines with operating partners. Improved requirements management, project management, testing, administration planning. Logging and random checks are performed to control unauthorised access to sensitive personal data.


Legal processes and investigations

Humana may be negatively affected by judicial rulings, settlements, and costs associated with legal processes and investigations. In the future, there is a risk that Humana could be party to legal action arising out of alleged malpractice or medication errors. In the event of incorrect processes or practice, Humana could be liable to pay damages or compensation. Humana has patient insurance and thirdparty liability insurance for clients.

Risk level
Probability – Low
Impact – Low

Comments
The risk is considered unchanged from the previous year.

Management
Systematic quality assurance, routines, processes and competence, and the right legal partners.


Infectious diseases, epidemics

Infectious diseases happen in society. Common examples are influensa and gastroenteritis, also known as stomach flu. These diseases can infect anyone in society, but the situation is most difficult for people in risk groups: older frail people, people with functional impairments or people with multiple conditions. In Humana’s operations, there are customers and clients in risk groups, and we have guidelines and routines in our management system for how our operations will prevent and manage various infectious diseases. Infectious diseases can also mean that employees become sick at the same time, which can lead to difficulties staffing the operations. If there is an epidemic (more cases of an infectious disease than expected) or a pandemic (an extensive spread of contagious disease in multiple countries), the risk that an individual is affected increases, as does the risk of finding enough skilled labour. In the case of an epidemic/pandemic, there is therefore a risk that our income and expenses are impacted negatively, for instance as a result of lower occupancy and costs for sick leave.

Risk level
Probability – Medel 
Impact- Medel

Comments
We have guidelines and routines for how our operations will prevent and manage various infectious diseases. We also have routines to establish a crisis organisation when needed, in order to further minimise the spread of disease and its impact on individuals and the company as a whole.

Management
The current Corona pandemic of 2020 is being managed by Humana’s operations in the same way as other contagious diseases. Primarily through preventative action to decrease the spread of the virus. All Humana employees follow our guidelines for Care Hygiene. We have established a crisis organisation to support the work and minimise the spread of disease and its impact.


Negative publicity as a result of operational incidents n the Company or the sector

For Humana, the Group’s reputation is fundamental for maintaining good relationships with current and potential clients and customers, and local, regional and regulatory authorities. The sector’s reputation also has an impact. If an incident were to occur in Humana’s or another private operator’s business, through negligence or deliberate action, this could result in negative publicity that would harm boththe sector and the company in question. Further, an incident could lead to the loss of customers and therefore revenue.

Risk level
Probability – Medel
Impact – Medel

Comments
Humana’s revenue is based on thousands of individual customer contracts. No individual contract could have a material effect on Humana’s total revenue. The growing need for care in society is creating a focus on the care and health care sector. At the same time, an ideologically based polarisation of political debate concerning private welfare companies is further increasing the risk of negative publicity, particularly if something goes wrong.

Management
Continuing focus on quality, development and training, core value work and crisis management. Well-grounded internal communication plan. Open and continuous online reporting of serious deviations. Transparent and accessible approach to media and work in the Association of Private Care Providers (Vårdföretagarna) and its counterparts in other Nordic countries.

Compliance, responsibility and sustainability

Humana’s operations are subject to extensive regulatory requirements. The Company must comply with a comprehensive framework of ordinances and other regulations at the national level. In addition, Humana’s business is dependent on the Company’s ability to obtain and maintain several permits and to successfully attract certain professional categories in order to provide specialised care services. Humana is also covered by data protection laws such as the Data Protection Regulation (GDPR), the Swedish Patient Data Act and corresponding legislation in Finland, Norway and Denmark. These regulations require systematised and secure routines to be in place for handling and storing personal information. The compliance risks related to laws and regulations identified by Humana are set out below:

Violation of data protection laws

Humana’s operations are subject to extensive data protection laws, such as the Data Protection Regulation (GDPR) and the Swedish Personal Data Act. Legislative requirements on the processing and protection of personal data place high demands on processes and security when handling, storing and disposing of personal data, and ensuring that registered individuals are properly informed about how the companies handle personal information. Violations of the GDPR can incur a very high penalty and cause reputational damage. Humana therefore works continuously to improve the Company’s processes, routines and regular controls.

Risk level
Probability – Low
Impact – Medel

Comments
Increased competence, continuing improvement of processes and routines, and investments in systems are critical to compliance with new laws and regulations in the area. Good compliance with established routines means that the risk is assessed as low.

Management
Training, processes, routines and systems, and systematic improvement work.


Quality deficiencies affecting customers/clients

There is a risk that staff do not follow Humana’s procedures and instead develop their own approach to clients and customers, who do not then receive the treatment or intervention that has been determined. The risk can arise, for example, during high staff turnover, when it is difficult to recruit staff or when there is a lack of leadership.

Risk level
Probability – Medel
Impact – High

Comments
There is always a risk of an employee making mistakes that affect a client. Systematic quality work is therefore a prerequisite for all care activities.

Management
Humana conducts extensive quality-assurance work through our Parus management system, backed by the quality organisation. Separate controls are carried out in all operations and are followed up by the quality organisation, which conducts internal controls. All employees have an obligation to report deviations and irregularities, which are then systematically followed up and analysed by the relevant manager. Clients can make complaints, both openly and anonymously.There is also a whistleblower function on Humana’s website.


Occupational health and safety

Care and healthcare are the sectors with the highest number of reported work injuries and illnesses caused by threats and violence. Humana’s operations are covered by regulations on occupational health and safety. Deficiencies in meeting such regulations could lead to fines or penalties. Humana conducts systematic health and safety work, with regular safety inspections.

Risk level
Probability – Low
Impact – Low

Comments
The risk is considered unchanged from the previous year and there are no major incidents or issues to report at present.

Management
The right internal competence through training, systematic health and safety improvement work, and action plans and control, with regular safety inspections.


Human rights violations

Humana’s operations are governed by each country’s regulations on working conditions, occupational health and safety, and freedom of association. Collective agreements are applied in all operations. Equal treatment and respect for human rights are normal practice at Humana, and no one is discriminated against or harassed for any reason.

Risk level
Probability – Low
Impact – Low

Comments
Humana’s operations, which are regulated by collective agreements,
and its suppliers and partners are located exclusively in the Nordic region. The risk
is considered very low.

Management
Active internal work on values, training, procedures and the whistleblower function.


Corruption

Humana’s extensive operations are reflected in a large volume of individual customer contracts. Agreements are signed and business decisions are made at different levels in the organisation. Individual customer contracts, framework agreements or construction contracts are signed with the payers, primarily municipalities, and this takes place on a decentralised basis. A clear decision-making and certification system facilitates the decentralised responsibility approach for tenders and customer and supplier agreements.

Risk level
Probability – Low
Impact – Low

Comments
Humana has few large procurement processes and well-functioning authorisation rights with system support significantly limit risks in this area. Humana follows the Swedish Annual Accounts Act and other applicable directives.

Management
Procedures, internal control, staff training and the whistleblower function.


Environment

Humana’s impact on the environment is mainly linked to the construction and operation of buildings where care is provided, procedures for sourcing food and materials, and food waste management. Vehicle use is necessary to carry out our services, particularly in the Individual & Family business. The climate smart travel policy applies to all staff.

Risk level
Probability – Low
Impact – Low

Comments
Humana identifies the areas in which we have an environmental impact. Humana will conduct its business with climate and resource efficiency by means of continuous improvements and defined targets.

Management
Staff training, environmental sustainability manager, systematic measurement of environmental parameters.

Financial

In the course of its operations, the Group is exposed to various types of financial risks, such as financing risk, liquidity risk, credit risk, interest rate risk and currency risk. The Group’s financial policy for financial risk management has been formulated by the Board and provides a framework of guidelines and rules in the form of a risk mandate and limits for financing activities. Responsibility for the Group’s financial transactions and risks is managed by the CFO in consultation with the Board and CEO. The overall goal of the finance function is to provide cost-effective financing and minimise adverse effects of market risks on consolidated earnings. The Company’s aggregate risks and measures are managed by the audit committee, which reports to the Board for assessment and approval.

The financial risks identified by Humana are set out below:

Financing and liquidity

Liquidity risk is the risk of the Group encountering problems in meeting its obligations associated with the Company’s financial liabilities. The Company’s CFO manages liquidity risks centrally for the entire Group. Liquidity requirements are monitored regularly and when reviewing Humana’s financing needs. The Group’s policy is to minimise borrowing needs by balancing surplus and deficit liquidity within the Group and to achieve financing flexibility through agreements for additional available credit. To facilitate liquidity planning and control, the Group has credit facilities (such as bank overdraft facilities) and a cash pool. Changes in demand may affect the Company’s revenue and earnings, which in combination with existing borrowing could affect its financing costs and liquidity situation.

Risk level
Probability – Medel
Impact – Medel

Comments
If above the financial target, Humana’s debt level can affect the ability to increase financial borrowing capacity in the short term.

Management
An increased focus on consolidation and operational efficiency to improve profitability is in progress. The Group’s financial policy sets frameworks and guidelines for risk mandates and limits in financing activities. Humana has available overdraft facilities to deal with liquidity fluctuations.


Interest rate risk

Changes in the cost of borrowing, i.e., interest rates, could increase Humana’s costs, which in turn could adversely affect the Group’s earnings and cash flow.

Risk level
Probability – Low
Impact – Low

Comments
Humana’s financing costs are affected by market interest rates. A lower debt level during the year has helped to reduce interest rate risk slightly.

Management
Derivative instruments may be used to manage interest rate risk.


Credit risk

Humana’s credit risks and credit losses are largely associated with trade receivables. Most of the Group’s trade receivables are from state, municipal and county council entities, which are considered to have good credit quality. Surplus liquidity is invested in deposit accounts, and derivative agreements are only concluded with the major Nordic corporate banks.

Risk level
Probability – Low
Impact – Low

Comments
Most of Humana’s trade receivables are from state, municipal and county council entities, which are considered to have good credit quality. The risk of credit losses is considered low.

Management
Humana’s liquidity is invested at low risk in deposit accounts and contracts are only entered into with banks that have high credit ratings.


Currency risk

As the Group operates in Sweden, Finland, Norway and Denmark, it is exposed to currency risks from exposure to the Euro, NOK and to some extent DKK. Consolidated profit is affected by translation of Finnish, Norwegian and to some extent Danish subsidiaries’ income statements for which translation is done at the average exchange rate for the financial year. Currency risk also arises through business transactions, reported assets and liabilities, and net investments in foreign operations. The currency exposure is partly offset by borrowing in the local currency.

Risk level
Probability – Medel
Impact – Low

Comments
Humana’s operations are conducted in four Nordic countries, with the emphasis on Sweden. However, Humana has recently expanded significantly in Finland. The Company is exposed to relatively minor risks arising from translation from EUR, DKK and NOK to the Swedish currency.

Management
Humana takes out loans in foreign currencies to offset some of the Company’s currency exposure.