Varma - Annual Report 2012

Business risks

Varma’s business risks are related to:

  • the earnings-related pension system,
  • investments,
  • insurance,
  • client base development, and
  • operations.

The company’s main operating sectors are pension services, insurance services, client services, and investment operations, including their support functions. Essential risks are related to investments, information technology, the networked operation of the pension system, adjusting the control system and operating models to the rapidly changing economic situation and to the efficient implementation of legislative changes.

Other major risks include costs related to the structure of the earnings-related pension system, risks related to the choice of technology, and the project and implementation stage of new projects, contractual and counterparty risks, as well as risks related to the functioning and financial success of the partnership network.

Varma’s most important operational requirement is to manage all pension and insurance transactions correctly and on time.

Financially the most important risks are those concerning investments and solvency.

Other risks are those connected with management information, corporate image, functional shortcomings and/or incorrect use of information systems, incorrect handling of information, incorrect interpretation of provisions and regulations, incorrect handling of investments, the company’s physical operating environment, efficient use of resources, and disturbances in the European payment system.

The pension system may also be affected by risks connected with its structure and functioning, and the country’s economy. These are discussed in more detail in the section Other risks.

Varma has one head office, one operational area (Finland), a simple group structure, statutory products, a small number of staff relative to its turnover, and a low number of transactions relative to its investment volume. Varma analyses its risks from bottom to top and from top to bottom so that it can ensure that all company risks are comprehensively covered from different perspectives.