Annual Report 2015

Internal procedures

Finnish Industry Investment’s operations are regulated by law and decree. The currently valid Act entered into force on 15 January 2014. Our operations are guided by the industrial policy and ownership steering objectives set annually by the Ministry of Employment and the Economy as well as by an investment plan, the company’s risk management policy, Impartiality Instruction, Insider Instruction, Instruction for Notification of a Concentration, and responsible investment principles.

Good corporate governance is a top priority in our internal procedures. In our operations we follow the Finnish Venture Capital Association's Code of Conduct and its guidelines for transparency and openness, in addition to well-documented internal instructions.

Investment plan

The framework for our investment policy is specified in a special law and decree governing the company. The company’s Board of Directors approves an action plan each year that defines in more detail the investment plan for the following year.

Investment operations focus on growth-stage investments, which currently account for some 70% of the investment portfolio. Investments are also made in earlier and in more advanced stages. The main focus of investments is on companies operating in Finland or Finnish companies. The objective is for investments to directly or indirectly benefit Finnish society. The investment portfolio is listed on the company’s website.

Investment process

To promote the reliability of operation and good risk management, internal procedures are divided into processes, for which the principle actions, responsibilities and controls are defined and described. The most important functional process is the investment process.

FII's investment process

The investment teams have the main responsibility for preparing and monitoring investments. The Management Team evaluates investment proposals, after which the Board of Directors decides on the investments. The Management Team decides on implementing an investment and also on exiting from investments. Investment teams manage and the back office, which is independent of investment operations, monitors all the investments in the portfolio. The investment process comprises a number of documented controls, for which the back office is responsible. Regular reports about the development of investments and risks associated with them are submitted to the company's Board of Directors.

FII's investment process:

  • Generation of deal flow (investment teams)
  • Preparation of investment (investment teams)
  • Investment proposal to management team (investment team, management team)
  • Investment decision to Board of Directors (board of Directors)
  • Implementation of investment (investment team, management team, back office)
  • Monitoring and management of investment (investment team, management team, back office)
  • Exit from investment (investment team, management team, back office)

At the end of 2015 in-house development work to upgrade the investment process was started. The expected completion date for this work is in early 2016.

Risk management policy

The risk management policy, confirmed by the Board of Directors, sets out the principles for risk management, specifies risk definitions and risk classifications, and also defines the main roles and divisions of responsibilities and the monitoring and reporting procedures.

Risk management ensures that risks borne in the company are commensurate with our risk-bearing capability. The objective of risk management is to ensure that the risks attached to the company’s business operations are identified and evaluated, that the company reacts to these risks, and both manages and monitors them.

The risks affecting the company and the management of those risks are described in more detail in the notes to the company’s IFRS accounts.

Instructions

  • Impartiality Instruction: In line with good corporate governance, the company's operations must be transparent and managed so that external players retain their trust in the company's operations. These aspects are particularly important in a government-owned company. We have instructions containing guidelines for the impartial and ethical behaviour of our personnel and Board of Directors. In compliance with good governance, any persons handling a matter must be independent and unbiased in respect of all aspects of the matters they handle.
  • Insider Instruction: Aimed at enhancing public trust in investment, the instruction is based on Finland’s Securities Markets Act and on the instructions and regulations supplementing it. Proper instructions also increase the knowledge of company personnel and other persons working within the company’s sphere of interest, so that regulations are not unwittingly contravened. The Insider Instruction applies to all people employed by the company. Although Finnish Industry Investment is not itself a listed company, it often handles information classified as insider knowledge. Therefore, it is important to define procedures ensuring that people working in the company are aware of their insider status, and that they know how to manage insider information and the trading limitations for those with insider information.
  • Instruction for Notification of a Concentration: Finnish Industry Investment's private equity and venture capital investments can necessitate filing a notification of a concentration and obtaining the permission of the Competition Authority. Instructions issued to personnel describe operating models for ensuring that the duty to notify authorities and to obtain permissions in merger and acquisition cases is properly handled.

Procurement

The bulk of the company's procurement consists of purchases of consultancy services. In order to efficiently implement investment operations, for instance, the company purchases due diligence services, legal services and sector expertise, such as consultancy services for exploring new sectors and charting investment opportunities in them.
 
Sizeable investments and large service procurements are planned in advance when preparing the budget and business plan for the following year. The company's Board of Directors decides each year on the budget and business plan. The operative management decides on the implementation of procurements included in the budget. The President & CEO can decide on individual ex-budget procurements. Large procurements are subject to competitive bidding and are prepared by a number of people.

Environmental responsibility - Green Office

We have participated in the WWF Green Office programme since 2010 and we were awarded a Green Office diploma in 2012. The Green Office programme aims to reduce the ecological footprint of an office and its emissions of greenhouse gases.

The objective of the Green Office initiative is continuous improvement of the environmental management system and heightened personnel awareness of environmental aspects. Finnish Industry Investment promotes sustainable development in its operations.

The eco-friendliness of its activities and procedures are monitored by measuring customary consumption, work-related travel, paper consumption, and electricity usage. The data is reported to WWF each year.

WWF Green office

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