Material risks and uncertainties
Management of operational, strategic and financial risks is a key prerequisite for NCC’s business and efficient risk management is a necessity for a stable and profitable company. The aim of risk management is to identify risks, assess the efficiency of existing controls and strengthen and develop preventive measures.
NCC has conducted a measurement of the company’s risks and describes below the risks regarded as most probable and that are estimated to have the greatest impact on NCC’s potential to achieve its objectives in the long and the short term.
Operational and strategic risks
|Competence supply and leadership||The successful recruitment, retention and development
of necessary skills is crucial for the company.
Development of managers is essential, firstly to
deliver quality in projects and, secondly, to retain
personnel with the desired skills.
|Competency mapping and development plans are prepared
for key positions. Group-wide skills development programs
for project management and leadership.
Future managers/leaders are identified and development
plans are devised. Succession planning occurs
within all business areas and corporate staff functions.
|Project management||Within contracting operations, the main operating risks
are project selection and project management.
|NCC assigns priority to submitting tenders with identified
risks that are manageable and calculable. Various contract
formats and partnerships with customers facilitate the
management of different risks. These operating risks are
counteracted through NCC’s project selection, assessment
of tenders and operational control systems.
|Work environment||Many operations in the Group feature risky elements
for workers that are subject to considerable demands
regarding correct training and safety equipment, and
not least an established culture that has the safety and
health of employees as its highest priority.
|Safety efforts are assigned top priority and are a mandatory
aspect of all management team meetings. At Group
level, distinct guidelines are set for safety work, and
instructions are devised for each business area, all in order
to achieve the vision of zero accidents at our worksites.
All reported incidents are analyzed with the aim of
improving the injury-prevention effort, with a particular
focus on creating a culture that encourages safe work.
|Supply chains||The company is highly dependent on suppliers and
subcontractors. Accordingly, this entails that NCC is
exposed to a risk of not being able to secure deliveries
of such critical materials as steel and bitumen.
The supply chains in the construction sector
represent a risk of inadequate control of, for example,
subcontractors labor conditions. There is a risk that
subcontractors do not comply with laws, rules and
business ethics. There is also a risk associated with
quality assurance of materials from national and
|NCC works systematically to assess and expand its control
of the supply chain and to secure access to critical materials.
The quality of suppliers is primarily assured by signing
central framework agreements that must be followed.
Purchasing that transcends central agreements must also
comply with established processes and use templates
developed for quality control. Tools for ensuring traceability
include logbooks and digital standardized identification
of construction products (GTIN).
NCC has a thorough process for evaluating suppliers in
risk areas in order to prevent human rights crimes.
|Compliance||Since NCC is a player in society with a broad customer
and supplier base, all employees are strictly required to
act in accordance with the company’s Code of Conduct.
Employees who potentially breach internal rules or
break the law represent a risk.
|NCC has focused continuously and actively on the
company’s values for a number of years and provides
training in the Code of Conduct. Efforts in 2020 include
further development of a training program addressing
|IT security||Updating and developing IT systems and applications is
crucial for improving the efficiency of the company’s
processes. Over the coming years, the company will be
updating a number of systems.
|NCC monitors technical advances, safeguards long-term
management and control of the reliability of IT infrastructure,
and its integration into processes for supporting and
protecting the operations.
Financial risks & reporting
|Interest rate risk||The interest rate risk is the risk that changes in market rates will adversely affect NCC’s cash flow or the fair
value of financial assets and liabilities.
|NCC’s Finance Policy has been adopted by NCC’s Board of
Directors and constitutes a framework for risk mandates
and limits in the NCC Group. The Group’s financial activities
are organized centrally, thus providing an adequate
overview of financial positions and risks. Refer also to
|Exchange rate risk||The exchange rate risk is the risk that exchange rate changes will adversely affect NCC’s income statement,
balance sheet or cash flow statement.
|Refinancing risk||Refinancing risk is the risk that opportunities for
financing will be limited and/or that the cost will be higher when loans that expire have to be refinanced,
which could adversely impact NCC’s operations,
earnings and financial position.
|Liquidity risk||The liquidity risk refers to the risk that NCC does not
have sufficient payment capacity at a given time, which
could adversely impact the Group’s ability to fulfill its
|Credit and counter - party risks in financial operations||Credit and counterparty risks in financial operations
refers to the risk that NCC’s financial counterparties
are unable to fulfill their obligations to NCC.
|Customer credit risk||Customer credit risk refers to the risk that NCC’s
customers are unable to honor payments to NCC for
delivered goods and services.
|At NCC, customer credit risks are managed through
Group-wide procedures for identifying and assessing
risks, both before agreements are reached with customers
and continuously in operational follow-ups. NCC’s credit
risk in accounts receivable is highly diversified given the
large number of projects of varying sizes and types in a
multitude of customer categories.
|Percentage of completion profit recognition||In assignments involving construction contracts, NCC
applies percentage-of-completion profit recognition,
whereby profit is recognized at the pace of completion.
Should the anticipated profit from a project deteriorate
during the project’s production period, this could result
in a need to reverse profit recognized earlier.
|By means of project management, meaning continuous
monitoring of production calculations, reconciliation of
work completed, project forecasts, etc., it is possible to
ascertain that the information is accurate.