Securitas AB Annual Report 2005

The Group – Risk management
Risk management – a responsibility for everyone
Managing risks on behalf of customers and Securitas is the core of our business.
Operational risks are managed through a decentralized approach according to
a four-step model. A structured process of delegating responsibility for risk
management stretches from branch managers upward in the organization to
Group Management and the Board of Directors.
Background
Securitas is exposed to various types of risks in the dayto-day
running of its business. These risks fall into two
main categories, operational risks and fi nancial risks.
Both can affect the fi nancial performance and position
of the Group if not managed in a structured way. Operational
risks are associated with running the operations
and providing services to customers, for example, when
services do not meet the required standards and result in
property damages or losses or bodily injury. Financial
risks arise because the Group has external fi nancing
needs and operates in a number of foreign currencies.
To allow the divisions, countries and regions to fully
focus on their operations, fi nancial risk management
is centralized as far as possible to the Group Treasury
Centre. For a further description of the management of
fi nancial risks, refer to Note 5 page on 85 in the Group’s
notes and comments.
Organization
As they arise in the local business operations, operational
risks must be managed with a decentralized approach.
Customer contract management and loss prevention are
essential activities in this regard. Every branch manager
in Securitas has to evaluate and understand the risks associated
with providing services. The Group’s divisional
Presidents are responsible for all aspects of operations
in their respective divisions, including operational risk
management and risk control. Claims settlement is a
Group responsibility, as is the purchase of certain strategic
insurance programs.
Risk responsibilities
Activities Branch/area
Country/
division Group
Risk evaluation ■ ■ ■
Contract management ■ ■
Loss prevention ■ ■
Claims settlement ■ ■
Insurance purchase
At the Group level, there is a risk committee consisting of
members of Group Management who set risk management
policies for the entire Group. The Group’s risk manager
and the risk managers in the divisions report to this committee.
Furthermore, the Security Services USA, Security
■
Services Europe and Cash Handling Services divisions
have their own risk committees, which meet regularly.
Management of operational risks
Preventing losses from occurring, thereby protecting
customers and employees, is the most important objective
of the operational risk management. In order to
evaluate the operational risks in new and existing businesses,
Securitas uses a business risk evaluation model.
This model focuses on certain important dimensions of
the assignment and the relationship to the customer and
is described below. Should a loss occur and Securitas
is deemed to be fully or partially responsible, insurance
solutions are used to minimize the fi nancial impact of
any customer or third party claims.
The business risk evaluation model
Assignment
This is the fi rst stage of the process. The key points
are the size of the project, its duration and whether it
involves a new or existing service. Specifi c training
and supervision requirements are also considered.
Risk
The type of customer under consideration is of importance
in terms of the level of risk of the operations and
the fi nancial status. High-risk customers and large loss
potential have to be identifi ed and insurance cover for the
risk involved established. Customer credit worthiness
also has to be assessed.
Contract
A fair distribution of responsibilities and risks between
Securitas and the customer is essential in every contract.
Standardized contracts are the norm. Reasonable caps on
potential liability claims and indemnifi cation for third party
claims are critical components of the customer contract.
Profi tability
This stage involves careful calculation of the profi tability
of the business. Managers have to assess the amount of
investment involved and whether there is any off-balance
sheet exposure. Payment terms also have to be considered,
and a judgment made as to whether the assignment
generates suffi cient profi t in relation to the risks; see the
Business Risk Evaluation Model on page 27.
26 SECURITAS 2005