Financial management

Financial success and our ability to create value for our stakeholders lay the foundation for our financial responsibility. Nokian Tyres conducts financial management in an active and result-oriented manner. Our Finance function collects information on the operating environment as well as the different stages and results of the company’s business processes. By processing this information, we aim at anticipating the effects of our future business decisions. Good financial management supports systematic and foreseeable operations. In 2016, Nokian Tyres performed well in all of the company’s key markets despite the challenging market environment.

Focus areas of financial management for 2016–2018

The goals of the Finance function in the coming years include enabling new projects and investments by ensuring sufficient cash and credit limits. Finance is closely involved in the implementation of the company’s potential structural changes, including the assessment and management of the related risks and opportunities, while adapting the financial reporting according to the company’s business needs. Product and customer profitability guide the company’s operations and are developed together with the business units. Finance is also actively involved in developing global processes that enable the best possible service for Nokian Tyres’ customers.

The head of financial administration is Vice President of Finance, who reports to the company President and CEO. Together, they are in charge of investor relations. Major investments are discussed by the regularly convening Investment Board.

Corporate Governance in a nutshell

Our corporate governance is based on the annual general meeting, Board of Directors, President and CEO, group’s management team, Finnish Limited Liability Companies Act and applicable regulations as well as the group’s policies, procedures and practices. The Board of Directors has approved the corporate governance statement and the company’s auditors verify that the statement and its related descriptions of the internal reporting controls and risk management correspond to the financial reporting process.

  • The annual general meeting holds the highest decision-making power. The annual general meeting decides on matters such as verifying the company’s annual accounts, profit distribution and discharging the Board of Directors and the President and CEO from liability. The annual general meeting also elects the members of the board and the auditors and determines their remuneration. In addition, the annual general meeting can make decisions concerning amendments to the articles of association, issue of shares, granting warrants and acquisition of the company’s own shares, for example.
  • Shareholders have the legal right to propose matters for consideration by the annual general meeting by submitting a written request to the Board of Directors in time for including the matter in the invitation to the meeting.
  • The Board of Directors is responsible for corporate governance and the appropriate conduct of ordinary activities. The Board holds the general authority in company-related matters, unless other company bodies have the authority under the applicable legislation or articles of association. The guiding principles and key tasks of the board are specified in the Limited Liability Companies Act, articles of association and the Board’s working order. The key tasks include consolidated financial statements and interim and half year financial reports, proposals to the annual general meeting, appointing and dismissing the President and CEO and organising financial control.
  • The President and CEO conducts the group’s business and manages the company operations in accordance with the instructions and guidelines provided by the Board of Directors. The President and CEO may, considering the extent and nature of company operations, only undertake unusual or far-reaching actions with the Board’s authorisation. The President and CEO is liable for ensuring the legal compliance of the company’s bookkeeping and for arranging reliable asset management. 
  • The group’s management team assists the President and CEO in managing the company operations. In accordance with the group’s meeting policy, the Management Workshop convenes once per month and it is attended by the President and CEO as well as the business Vice Presidents, service Vice Presidents, Vice President for Russian operations and chief audit executive (CAE).
  • The group’s internal control mechanisms are in place in order to ensure that the financial reports released by the company contain material and accurate information on the group’s financial standing. The group has defined group-level instructions and policies for the key operational units specified below in order to ensure efficient and profitable company operations.

Learn more about our full corporate governance system here!

Read more about our report of salaries and remuneration here!

Risk management at Nokian Tyres

The group has adopted a risk management policy, approved by the Board of Directors, which supports the achievement of strategic goals and ensures business continuity. The group’s risk management policy focuses on managing both the risks pertaining to business opportunities and the risks affecting the achievement of the group’s goals in the changing operating environment.

The risks are classified as strategic, operational, financial and hazard risks. Strategic risks are related to customer relationships, competitors’ actions, political risks, country risks, brand, product development and investments. Operational risks arise as a consequence of shortcomings or failures in the company’s internal processes, actions by its personnel or systems or external events, such as legislative changes, unpredictable rulings by judicial systems or authorities or changes in raw material prices. Financial risks are related to fluctuations in interest rate and currency markets, refinancing and counterparty and receivables risks. Hazard risks may lead to injuries, property damage, production outages, environmental impacts or liabilities to third parties.

The most significant risks related to Nokian Tyres’ business are the country risks related to the Russian business environment, reputation risks, tax risks (especially in Finland), product and R&D risks, production outage risks, currency and receivables risks and governance, information security and data administration risks. Due to the company’s product strategy, interruption risks that are related to marketing and logistics may especially have a significant impact on peak season sales. The risk analysis conducted in 2016 focused special attention on corporate social responsibility risks, the most significant of which are related to the company reputation and product quality.

The risk management process aims to identify and evaluate the risks and to plan and implement the practical measures for each risk. Among others, such measures may include avoiding the risk, reducing it in different ways or transferring the risk through insurance policies or agreements. Control functions and measures are verification or back-up procedures applied in order to reduce the risks and ensure the completion of the risk management measures.

Risk management is not assigned to a separate organisation. Rather, its tasks follow the general division of responsibilities adopted elsewhere in the organisation and its business. The company’s Board of Directors discusses the most significant risks and their related measures annually in connection with the strategic process.

Sustainability improves our competitiveness

As a manufacturer of high-quality, innovative premium tyres designed for demanding conditions, we want to be an industry pioneer also in terms of sustainability. The more often our name and products are associated with environmental responsibility in addition to safety and high quality, the more we can attract sustainability-conscious customers. Among other things, we invest in the eco-friendliness of our products and processes and the safety of our products. Corporate responsibility also improves our competitiveness, thereby supporting our goal of profitable growth. Business success, in turn, benefits our surroundings and stakeholders.

In addition to our corporate sustainability goals and development plans, our externally assured GRI G4 compliant Corporate Sustainability Report guides the development of sustainability in our company. For us, profitable growth, good HR management and environmental aspects are important for the development of sustainable business operations, in addition to product safety and quality.

Nokian Tyres is included in the OMX GES Sustainability Finland GI Index. The index provides transparent, objective and reliable information for making responsible investments. The reference index comprises 40 leading companies listed on Nasdaq Helsinki in terms of
sustainability. The index companies are selected based on their compliance with the requirements, which focus on the management of environmental, social and corporate governance (ESG). Nasdaq calculates the index in partnership with GES Investment Services. Nokian Tyres is also included in the STOXX Global ESG Leaders and FTSE4Good indices.

Our company has received consistent and good scores in the global Dow Jones Sustainability Index assessment. The assessment reviews corporate sustainability against 18 assessment criteria, including environmental management, human rights, supply chain sustainability and occupational health and safety. In the 2016 assessment, Nokian Tyres’ score exceeded the industry average in nearly all 18 criteria. The assessment is conducted by RobecoSam, Switzerland.

We track financial management with the following indicators:

  • G4-34 Governance structure of the organisation
  • G4-DMA Disclosure on the management approach
  • G4-EC1 Produced and distributed direct financial added value
  • G4-EC8 Key indirect financial impacts and their scope
  • G4-PR5 Results of surveys measuring customer satisfaction

This page is included in KPMG’s assurance scope. Assurance report can be found here.