Risk Management
The company’s risk management aims to safeguard the smooth continuity of business operations and ensure the Group’s steady profit development. The risk management process evaluates and controls those business risks that could prevent or jeopardise achievement of strategic goals for the Group or part of it. Risk management is supported by internal guidelines. Responsibility for risk management lies with the company’s operational management. Risk management is supervised by the Board of Directors. Appropriate insurance policies have been taken out to protect the company against substantial business risks.
Operational risks
Production and sourcing
Marimekko both manufactures and outsources products. The company’s own production units are all located in Finland. To balance out risks relating to production and sourcing, the company uses many subcontractors both in Finland and abroad. Warehousing has been partially outsourced. As a consequence of the expansion of international business operations and sales growth, purchasing has become increasingly important for Marimekko. The company seeks to minimise the potential risks related to production and sourcing by reinforcing its subcontractor network and engaging in even closer co-operation with its key partners. In 2007, the reliability of delivery was slightly lower than before in some product categories because of faster than expected growth of sales. The resulting lack of capacity was compensated with new subcontractors.
Product design
Product design plays a decisive role in Marimekko’s business operations. To safeguard design continuity, Marimekko employs many designers. All of the company’s current designers are freelancers, and most have worked with Marimekko for years. Increased diversity has been injected into Marimekko design in recent years through co-operation with several famous designers. New young talent has been sought through design competitions and close co-operation with the educational institutions of the field.
Key employees
As Marimekko’s business growth increasingly comes from international markets, the role of key employees of the various business areas is emphasised. During the next few years, many of the company’s key employees will retire. The company is preparing for the generation shift by training successors and reinforcing resources through recruitment.
Financing
The Group’s long-term financing has been arranged through the parent company. Subsidiaries are financed through intra-Group loans. The Group’s liabilities include both long-term and short-term loans. All the loans are denominated in euros. The Group operates in international markets and is thus exposed to foreign currency risks resulting from currency fluctuations. The foreign currency risk is primarily associated with sales denominated in foreign currencies. Purchases denominated in foreign currencies reduce foreign currency risks. The most important currency in purchases and sales is the euro. Foreign currency risks mainly involve purchases and sales in the US dollar. The company protects itself against foreign currency risks of sales by taking into account exchange rate fluctuations when pricing its products. Hedging decisions concerning currencies are based on estimates of the effects of each currency on the Group’s result and balance sheet indicators, long-term cash flow and hedging expenses. The company seeks to minimise credit loss risks by setting credit limits and actively keeping track of customers’ payment behaviour. The credit risk related to business operations is also reduced with advance payments, bank guarantees and letters of credit.
Business environment and demand
Marimekko operates in a field in which the sales trend is particularly sensitive to cyclical fluctuations in demand. Competition in the textile and clothing business has increased substantially in recent years as the supply has grown. Marimekko seeks to meet market challenges by focusing on top-notch, distinctive design and quality. Competitiveness is improved by sharpening product concepts and strengthening the brand. Marimekko’s sales are divided between numerous market areas, which reduces the effect of any changes in individual markets on total sales. The diversity of Marimekko’s product range levels off collection-related and seasonal variations in sales of individual product groups.