Akademiska Hus Annual Report

MARKETRisk management and the futureProperty management requires long-term strategic decisionsIn the short-term there is limited potential to influence financialresults. A great deal of energy is being devoted to managementissues to influence the financial results in the longterm. One example is the development of in-house energysolutions to reduce costs. Akademiska Hus has long leases,providing stable income. The operating costs are in the shorttermregarded as fixed whilst maintenance costs are to a largeextent variable and can be reduced to counteract a fall inprofits or increase in vacant space.With effect from the 2007 Annual Report, Akademiska Hus will not publishprofit forecasts. The reason for this change is that the AkademiskaHus Annual Report is part of the bond prospectus that falls under newEU rules. If an issuer chooses to include a profit forecast, the prospectusmust include an account of the most important assumptions that formthe basis for the forecast and the prospectus must include a statementfrom the auditor. Following discussions with the Company’s Audit Committee,the conclusion is that examination and verification of theassumptions that make up the profit forecast would be far too extensive.Profit forecasts have therefore been excluded from the Annual Report.Certain information on prospects for the future will, however, continueto be provided under the various sub-headings covering the mostimportant areas.purpose and are not in a broad sense general. Investments in speciallyadapted premises take place once a long lease that justifies the investmenthas been signed. Purchases and sales of properties take place tocounteract and deal with the strategic risk in the property portfolio.Operating risksThe strategy of owning and managing properties also entails operatingrisks, which Akademiska Hus works actively to handle. The term operatingrisk refers mainly to the risk of financial consequences and consequencesrelated to trust which ensue from shortcomings in internal routinesand systems. The handling of operating risks is aimed at identifying,assessing, monitoring and reducing those risks. The risks areassessed and handled based on their expected consequences and thedegree of probability that they could occur. Internal directives and guidelinesform the basis for risk management within Akademiska Hus. Asopposed to market risks, the handling generally is directed more atreducing the risks. Corporate culture is critical in ensuring that internalcontrols are a normal and necessary operating prerequisite. An importantfactor in handling the operating risks is a standardised and processorientedworking approach. The essential elements of property managementare process-oriented and include control points. Compliancewith the established working approach is revised on an ongoing basisas part of the quality assurance process.Strategic risk – owning and managing propertiesAkademiska Hus is affected by the government’s education policy aswell as macroeconomic factors such as inflation, employment andexpansion in society.Key risks also take the form of property investments and transactions.Major investments in creative environments for know-how andresearch have formed the Akademiska Hus campuses. In this respectthe property portfolio is a strategic risk. The campuses have a specificThe operating risks that need to be handled can be divided into• Administrative – insufficient or unsuitable routines, lack of controlsand reporting, human error, lack of expertise, an unclear allocationof responsibility.• IT – incorrect data systems, information security, stoppage risks• Legal – sub-standard documentation, incorrect agreementsThe Group’s assets are insured in line with the assessed insurancerequirements.30 Akademiska Hus Annual Report 2007 | Risk management and the future