Governance

Managing risks to support our new strategy

Effective risk management is used to proactively mitigate Cramo’s exposure to financial and non-financial risks.  Within Cramo’s risk management framework, we identify and evaluate potential risks and their consequences, and define and implement actions needed to minimise their impact.

Cramo has identified a number of potential risks that are associated with the ability to create value in the short and long term and that can prevent us from reaching our strategic targets. These include strategic and operative risks as well as risks related to financial markets, competition, compliance with laws and regulations, sustainability and the Group’s reputation. Once identified, the risks and their potential financial and non-financial impacts are analysed and evaluated, and the actions needed to mitigate the impacts are defined. The risks are managed through control activities that are set throughout the organisation.

Ensuring value creation ability

The most significant operative risks are related to strategic investments, the success of the Group’s acquisitions and information system projects, as well as the efficiency of operations. Risk mitigation related to personnel, occupational health and safety, the environment, and compliance with laws and regulations is also identified as being crucial to our value creation ability.

As a response to the megatrends affecting our industry and to ensure responsible business operations and growth, sustainability is deeply embedded in our strategic and operational decision-making as well as in our risk mitigation.

Cramo acknowledges the impact of local and global developments as possible risks

Economic uncertainty may be reflected in Cramo’s operations as decreased demand in one or more market areas, fiercer competition, lower rental prices, higher financial expenses, or customers experiencing financial difficulties and increasing credit losses. In addition, economic uncertainty increases the impairment risks to the balance sheet values.

Of geopolitical risks, global trade tensions and tariffs are creating uncertainties in the markets in which Cramo operates. The threat of an economic slowdown in Europe, European political fragmentation, including the Brexit outcome, and sovereign debt challenges in Italy may also influence general economic development and, consequently, construction and the demand for rental services.

Our risks and how we mitigate them

Economic conditions
Potential impact
  • Demand for our services is linked to the general level of economic activity over the long term. Equipment rental demand is directly linked to construction activity, which is cyclical in nature
Mitigation
  • Manage and control capital expenditures and investments, taking into account the different phases of the economic cycle
  • Build flexibilities into the business model
  • Increase exposure to less cyclical business (industrial maintenance and services)
  • Maintain capital structure and debt facilities in order to absorb market disruptions
Development
  • We adapted to lower market demand in 2019 by clearly reducing our investments compared to the previous year and executing a cost programme
  • Our balance sheet is strong and our cost position competitive to perform well also in a weaker market environment
Link to strategy
  • Top-tier performance
  • Stronghold in the industrial segment
  • Leading partner in services
  • Target: Net debt/EBITDA <3.0
Competition
Potential impact
  • This already competitive and active market can become even more competitive
  • New entrants or existing competitors can introduce new, market-changing solutions or offerings
  • Increased and fierce competition could result in reduced sales, a smaller market share and lower profitability
Mitigation
  • Create a competitive advantage by providing the best service at a price that offers the highest value for our customers – concrete promises to customers
  • Safeguard our market position by having industry-leading IT solutions, experienced employees, a depot network that is easily accessible and a large, versatile equipment fleet
  • Monitor our market share and track the performance of our competitors
  • Create digital solutions that help customers improve their competitiveness
Development
  • In 2019, organic sales growth for Equipment Rental was -2.3%
  • Competition in the equipment rental industry increased in 2019. Our pricing strategy, digitalisation and high-quality customer service will support our position in the competitive landscape
  • We have reacted to changing customer needs by launching new digital solutions
Link to strategy
  • Leading partner for services
  • Digital leader in the rental industry
Financing
Potential impact
  • Debt facilities, bonds and other financing arrangements are committed and valid only until their maturity. Debt facilities also include financial covenants. The main risks are failing to renew maturing instruments, causing insolvency, and breaching these covenants, leading to default
Mitigation
  • Maintain at all times the availability of sufficient financing instruments with long and balanced maturities. Negotiate new agreements well before they are needed
  • Target to have a conservative leverage ratio, net debt/EBITDA below 3.0
Development
  • Our strong cash flow profile and performance enables us to benefit from strong financial markets with ample availability and competitive pricing of funds
  • On 31 December 2019, Cramo Group’s undrawn committed credit facilities (excluding leasing facilities) amounted to EUR 251.7 (258.5) million
Link to strategy
  • Target: Net debt/EBITDA <3.0
Information technology
Potential impact
  • Our operations rely heavily on information technology since we have high transaction volumes due to our large fleet and customer base. A cyberattack could lead to a loss of sensitive data or failure to deliver service to our customers. This could affect our reputation and we could suffer financial losses or penalties
Mitigation
  • Updated parameter protection and enhanced logging and monitoring of network traffic to avoid unwanted traffic
  • Blacklisting of sites
  • Site advisory system
  • Enhanced protection of clients
  • Updated firewalls
  • Enhanced partnership with IT security partners
Development
  • Advanced e-mail protection system
  • MDM tool for mobile devices
  • Vulnerability checks on all IT infrastructure components 4 times a year
Link to strategy
  • Digital leader in the rental industry
Health and safety
Potential impact
  • Our customers and employees put a high priority on health and safety. Furthermore, we need to comply with laws and regulations governing occupational health and safety. An inability to match or respond to external and/or internal demands will result in damage to our reputation, a loss of customers and decreased employer attractiveness. It might also result in severe injuries to individuals and legal claims against the Group
Mitigation
  • Cramo works systematically to reduce health and safety risks by, e.g., providing internal safety training and relevant protective equipment, conducting audits, and promoting wellness and an active lifestyle
  • To reduce the risk at customer sites, Cramo works systematically with safety instructions, offers safety training and instructions, and reports major incidents to the manufacturers concerned
Development
  • In 2019, LTIR (number of work-related accidents with at least one full day absence/million working hours) increased, from 8.8 to 9.7
  • No legal claims pertaining to health and safety were filed against Cramo during the year
Link to strategy
  • Target: LTIR 0 by 2023
  • Target: 0 legal proceedings
Environmental impact
Potential impact
  • We meet increased demands from customers for resource efficiency and a reduced environmental impact. We also need to comply with laws and regulations governing environmental protection. An inability to match or respond to those demands will result in damage to our reputation, a loss of customers and/or lost opportunities. It might also result in environmental damage and legal claims against the Group. An inability to optimise resources will lead to increased operational costs
Mitigation
  • We work systematically to reduce our environmental impact, focusing on reducing our energy usage and emissions as well as minimising waste
  • As part of our strategy, we aim to reach out to customers and other stakeholders, seeking opportunities to cooperate in the development of sustainable solutions
Development
  • At the end of 2019, 85% of the units within our energy-powered fleet were powered by electricity
  • CO2e emissions, scope 1 and 2 relative to sales, were 19.4 tonnes/MEUR in 2019 (15.6 in 2018)
  • No environmental legal claims were filed against Cramo during the year
Link to strategy
  • Target: Share of units powered by electricity within the energy powered fleet 90% by 2023
  • Target: CO2e emissions, scope 1 and 2 relative to sales, <15 tonnes/MEUR by 2023
  • Target: 0 legal proceedings
Human rights
Potential impact
  • The protection of human rights is fundamental to Cramo. We have identified non-discrimination as a major focus area. An inability to maintain a non-discriminating working environment will result in damage to our reputation, decreased employer attractiveness and a loss of customers. It might also result in harm to individuals as well as legal claims against the Group
Mitigation
  • We have established a diversity policy, including a policy on equal rights and opportunities
  • Our values and Code of Conduct are systematically communicated and embedded throughout the organisation. We also provide a whistleblowing service for our employees to report suspicions of misconduct
  • Our Supplier Code of Conduct is included in all new supplier contracts
Development
  • In 2019, no legal claims regarding human rights including discrimination and sexual harassment were filed against Cramo (1 legal proceedings in 2018)
Link to strategy
  • Target: 0 legal proceedings
People
Potential impact
  • Retaining and attracting people with the right competences is key to delivering an outstanding performance and excelling in customer satisfaction
  • Excessive staff turnover or an inability to attract new talent may impact our capability to perform and to maintain the high quality of our customer service, and could ultimately adversely affect our financial performance
Mitigation
  • Cramo works systematically to offer safe, stimulating workplaces and aspires to provide an inspiring environment for professional and personal development for all our employees
  • Employee satisfaction is regularly monitored to help identify development areas, and we have a process in place for annual performance reviews
  • We work actively to strengthen our employer brand to attract potential employees, and we also put effort into surveying the expectations that future talents have regarding working life
Development
  • In 2019, we continued to establish our people promise, We are Shapers – with the ambition to increase employee engagement and strengthen Cramo’s employer brand
  • The employee turnover rate in 2019 was 20% (19% in 2018)
  • The rate of new employee hires in 2019 was 21% (21% in 2018)
Link to strategy
  • Enable people to perform
Business ethics
Potential impact
  • It is vital to us that our customers, employees and other stakeholders trust that we conduct business in an ethical, transparent and lawful manner. Failure to comply with laws and regulations will result in damage to our reputation, a loss of customers, and a loss of trust among our employees as well as among other stakeholders. It might also result in legal claims against the Group
Mitigation
  • Our values and Code of Conduct are systematically communicated and embedded throughout the organisation. We also provide a whistleblowing service for our employees to report suspicions of misconduct
  • Our suppliers are evaluated using business ethics criteria. Our Supplier Code of Conduct is included in all new supplier contracts
Development
  • 0 legal claims regarding non-ethical behaviour, such as corruption, were filed against Cramo in 2019
  • During the year 74% (33%) of our employees received Code of Conduct training and confirmed in writing that they have read and understood the Code of Conduct
  • 30% of our purchase spend was covered by our Supplier Code of Conduct
Link to strategy
  • Target: 0 legal proceedings
  • Target: All employees get Code of Conduct training and confirm in writing that they have read and understood the Code of Conduct
  • Target: >60% of purchase spend is covered by Supplier Code of Conduct by 2023