Review of 2012 – EUR - Skanska

Skanska Tender Approval Procedure (STAP)Skanska uses a Group-wide procedure for identifying and managing risks:the Skanska Tender Approval Procedure (STAP).A specialist unit, the Skanska Risk Team (SRT), examines and analyzes conceivable tender proposalsor investments above a certain size. The SRT processes 40–50 tender proposals per month. Eachbusiness unit conducts a risk assessment and identifies measures for managing risks. The proposalsare then processed by the SRT, which issues a recommendation on whether tenders should be submittedand under what circumstances. The final decision about a tender is made by the SET TenderBoard, a part of Skanska’s Senior Executive Team, and in some cases, by the Board of Directors.ActivityResponsiblePreliminary evaluation– Within Skanska’s corecompetence?– Are there project resources?– Right customer?– Special risks to manage?Business unit◀Draft of tender/investment– Risk management– Estimates– Human resourcesBusiness unit◀Final tender/investment– Preparation– SubmissionBusiness unit◀Execution according tocontractMonitoring and control– Financial outcomeand forecasts– Technical issues– Schedule– FeedbackDecisionProceed?Abstain?◀◀Submit tender?Abstain?◀Contract negotiationsResponsibleBusiness unit/Senior Executive Team (SET)Business unit/SET/Board of DirectorsBusiness unitBusiness unit/SET/Board of DirectorsRisk managementRisk management focuses on identifying, preventing,managing and minimizing the risks of individualprojects. Approximately 30,000 potential projects areanalyzed each year, and a correct assessment lays thefoundation for winning bids and positive end results.The Senior Executive Team (SET) handles strategic,financial and legal risks with the support of Groupfunctions. However, risk analyses are mostly performedby the respective business units.The analysis work utilizes a number of variables ormatrices that are refined and systematized over time inorder to achieve Group-wide uniformity and reliabilityin risk management.To proceed to the tender phase, a project must bechecked in relation to the Skanska Heat Map – anidentification of core competence in the various units.This analysis determines whether the unit has the correctworkforce and knowledge of the local market andwhether the contract form and customer profile providethe prerequisites for a positive end result. The SkanskaHeat Map is revised annually.Risk management is currently being further developedin two areas: the application of processes throughout aproject’s life cycle and their local application in the businessunits’ regional operations.The life-cycle perspective means that projects arefollowed-up on and repeatedly supported throughoutthe duration of the project, from tender to commencementof construction, execution and final delivery. Thisensures the continuous sharing of best practices andrisk-analysis training.Risk management in ConstructionThe Skanska Tender Approval Procedure (STAP) andSkanska SET Tender Board (STB) process approximately500 tender proposals per year based on their size. Supplementaryinformation is provided for some projects beforethey proceed to the tender phase. In 2012, 4 percent of theproposals did not proceed to the tender phase.Risk management procedures were expanded in 2012,concerning threshold values and the number of checkpointsfor residential projects, renovation projects, long-termservice contracts, energy-guarantee actions and issuesconcerning responsibilities following project completion.The review of conceivable tenders also highlights thenew or extended opportunities of a potential tender –whether Skanska can strengthen its competitivenessor profitability by offering extended and/or improvedservices.Risk management in project development operationsThere are additional dimensions to the analysis of risksin project development operations, since Skanska’s roleis also that of a property developer in these situations.Project planning includes analyzing macroeconomic factorsand risks in connection with investment, leasing anddivestment. Four new checkpoints were introduced inResidential Development operations for the approval of landpurchases, concepts, pre-sales and construction starts.In Residential and Commercial Property Development,capital exposure is limited to a maximum amount.Reaching maximum capital exposure will mean thatSkanska may not start up any new projects until room forthis has been created by selling homes that are under constructionor finished or by leasing or selling commercialspace in projects under construction or finished. CapitalSkanska Review of 2012 – EUR version Risk management 13