Corporate Governance Statement
Risks and risk management
Capital adequacy management
Taaleri’s corporate governance is based on the laws of Finland and the company’s Articles of Association. The company complies with the rules, regulations, and guidelines for listed companies issued by Nasdaq Helsinki Ltd and the Finnish Financial Supervisory Authority as well as the Finnish Corporate Governance Code 2020 published by the Securities Market Association.
The auditing firm of Ernst & Young Oy has verified that the statement has been issued and that the general description of internal audit and risk management systems associated with the financial reporting process conforms to the same in financial statements.
The code is available on the Securities Market Association website www.cgfinland.fi.
Taaleri’s Corporate Governance Statement referred to in the Corporate Governance Code:
The task of risk control is to identify, assess, measure, treat and control risks in all Taaleri Group’s businesses that influence the realization of the Group’s strategic and operative goals, as well as to oversee that the principles approved by the Taaleri Plc Board of Directors are complied with.
Risk management aims to reduce the likelihood of unexpected risks being realised and their impact to Taaleri Group’s business operations. Risk management supports achievement of strategic goals by promoting better utilisation of opportunities in all activities and more efficient distribution of risk-taking capacity to the different functions and projects within the defined risk appetite framework.
In Taaleri Group risk is defined as the effect of uncertainty on objectives. Risk is seen as two-sided, it can be hazard or financial loss but on the other hand there might also be opportunities for better results. Risks are divided into five main categories: strategic and business operations risk, credit risk, liquidity risk, market risk and operational risk (including compliance risk). Sustainability and climate risks are included in the aforementioned risks. Taaleri’s risks and risk management are described in more detail in the 2021 financial statements, which is attached to the 2021 annual report.
The risk capacity of the Taaleri Group consists of a properly optimized capital structure, profitability of business operations and qualitative factors, including good corporate governance, internal control and proactive risk management. Additionally, regulated companies perform proactive capital adequacy assessments. Through effective risk management, the Taaleri Group strives to ensure the continuity of the operations of the Group and its companies, and the risk capacity required to achieve set strategic goals.
Taaleri Group’s attitude towards risk-taking is based on careful consideration of adequate risk/return relationship. Taaleri Plc’s Board of Directors has decided that the Group may not in its activities take a risk that exceeds the agreed risk appetite.
Regarding sustainability risks, Taaleri Group does not take risks in its operations that conflict with Taaleri's Sustainability and Sustainability Risk Policies, the Group's Operating Principles, or Taaleri's voluntary sustainability commitments to external parties.
Taaleri’s continuing operations include two reported segments: Private Asset Management, which is divided to Renewable energy and Other private asset management, and Strategic Investments, which includes Garantia Insurance Company. The group Other presents Group’s non-strategic investments, Taaleri Kapitaali and Group operations not included in the business segments.
Private Asset Management segment: In reporting the Private Asset Management segment is divided into Renewable energy and Other private asset management. Renewable energy includes Taaleri Energia, which develops and invests in industrial-scale wind and solar power projects. It also manages investments throughout their lifecycle. The other areas within Private Asset Management include Taaleri’s real estate, bioindustry and other businesses. Group investments that support the core business and the development of the businesses reported under the Private Asset Management segment are reported under the segment.
The main risks of Taaleri’s private equity fund operations consist mainly of operational risks, risks relating to own investment projects, and, to a slight extent, credit risks. The result of the business is influenced by the development of assets under management, which depends among other things on the progress of private equity fund projects, the development of capital markets and the success of the cooperation with Aktia. The profit development is also influenced by the realization of performance fees and the success of own investment projects. On the other hand, private equity fund management fees are based on long-term contracts that bring in a steady cash flow.
The objective of the renewable energy business is to channel assets under management to renewable energy production projects and to other energy projects supporting sustainability. The goal is to internationalize and expand the renewable energy business considerably, which naturally increase the risks relating to the growth and internationalization of the operations. The earnings of the renewable energy business are impacted by its success in finding suitable projects, its ability to identify all risks related to renewable energy’s international development, construction, financing and operations, and its success in the internationalization of its operations. The earnings of the renewable energy business are also affected by the success of its own investments in energy projects.
Strategic Investments segment: The objective of Garantia is to modernize collateral practices and provide customers with easy and cost-effective guaranty solutions and new business opportunities through digital channels. The company's business is divided into guaranty insurance and investment operations.
The insurance and investment activities carried out by Garantia Insurance Company are central to Taaleri's risk position. The main risks associated with Garantia’s business operations are credit risks arising from guaranty operations, the market risk regarding investment assets, and regulatory risks. In residential mortgage guaranties, Garantia is dependent on cooperation with its distribution partners. Garantia’s capital adequacy is strong, and its risk position has remained stable.
Other group: The group Other is used to present the Group’s non-strategic investments, Taaleri Kapitaali and Group operations not included in the business segments. The most significant risks of the Other group consist primarily of private investments and financing granted by Taaleri Sijoitus Oy as well as of credit risks related to Taaleri Plc’s granted loans and receivables from credit institutions. In addition to the commission income of Taaleri Kapitaali, the Other group’s earnings consist of the fair value changes in investments and of profits/losses gained in connection with the sales of its investments. The earnings and results of the Other group may thus vary significantly between periods under review.
On October 29, 2021, the Financial Supervision Authority decided that the Taaleri Group would no longer fall within the scope of the Act on the Supervision of Financial and Insurance Conglomerates (RaVa) after the sale of its wealth management operations.
Taaleri Private Equity Funds Ltd and Taaleri Energia Funds Management Ltd are licensed as alternative fund managers by the Financial Supervisory Authority. Garantia Insurance Company Ltd is an insurance company operating under the supervision of the Finnish Financial Supervisory Authority. In the future, Taaleri Plc’s operations are regulated especially by the requirements of a listed company, and Garantia will be mainly responsible for meeting the requirements set by the Insurance Companies Act in the Taaleri Group.
Garantia’s solvency strengthened during the year 2022 mainly thanks to a decreased solvency capital requirement. The company’s basic own funds amounted to EUR 105.3 (117.0) million at the end of the year 2022, and the solvency capital requirement amounted to EUR 45.5 (53.4) million. The solvency ratio, or the ratio of basic own funds to the solvency capital requirement, was 231.3% (219.2).
Basic own funds decreased mainly due to the comprehensive loss reported for the period, resulting from decreased fair values of investment assets. The basic own funds include foreseeable dividends as a reduction, the amount of which on the other hand, came down from the previous year.
The decrease in the solvency capital requirement was mainly attributable to decreased capital requirements for market risks. The decrease in the capital requirement for market risk was mainly due to reduced equity and credit spread risks. Risk reduction was also affected by the lowered value of the investment portfolio, and changes in the investment allocation executed during the year. In addition, the underwriting risk related capital add-on decreased from the previous year.
Solvency II capital adequacy regulations do not fall within the sphere of statutory audit, and hence the Solvency II figures have not been audited.
The compliance of the Group's parent company has been outsourced to an external service provider and it consists of a designated Compliance Officer and the Taaleri employees responsible for compliance matters in the businesses cooperating with them. The main tasks of the Group Compliance are to:
Internal Audit is an assurance function independent of the operational functions of the Taaleri Group companies. The Internal Audit function is set up by the Board of Directors and operates under the authority of the Group CEO. The Taaleri Group has outsourced the practical implementation of the Group's internal audit to external service providers.
Internal Audit is an independent, objective assurance and consulting activity designed to verify the adequacy, effectiveness and efficiency of internal control. Internal Audit supports the Group's senior and operational management (Board of Directors, CEO, line managers) in managing and supervising operations.
The objective of the Group's internal audit is to support the Group in achieving its goals by providing a systematic approach to assessing and developing the effectiveness of risk management, risk control and management processes. Internal audit aims to add value to the organization and improve its performance.
Internal audit work is guided by national and international regulations as well as international standards of professional practice in the field, including ethical rules, professional standards, and practical guidelines.
The company has one auditor that must be an audit firm defined in the Auditing Act. The auditor is elected at the Annual General Meeting for a term of office which ends at the end of the first Annual General Meeting following the election.
Authorised public accountants Ernst & Young Oy were elected as auditor at Taaleri Plc’s Annual General Meeting held on 25 March 2021. Johanna Winqvist-Ilkka APA was elected as the appointed auditor.