Hands and document

Risks and risk management

Entrepreneurship means taking business risks and thus enabling a greater return compared to completely risk-free investments. Any responsible business also needs to manage risks to individuals and society. In order to identify and manage the various risks, including risks related to sustainability at the individual and societal level, Humana regularly conducts risk analyses.

Risks are an inherent part of all business activities and must be effectively managed by the organization. Humana's risk management aims to prevent, limit or avoid risks from materializing and adversely affecting the business. A risk is defined as an uncertainty about the occurrence of an event that may affect the company's ability to achieve its objectives.

The purpose of Humana's work on risk management can be summarized as follows:

  • to create an awareness of the company's risks among management and the board
  • to create effective governance and control of operations so that the company can achieve its objectives
  • creating documents and processes that support day-to-day operations
  • ensuring effective disclosure of the company's risk exposure to investors and other stakeholders

Risk categories

In its risk analysis, Humana has identified possible events, scenarios and activities that could have an impact on the company's operations and the company's ability to achieve set goals. These risks have been evaluated and concentrated into a list containing the most relevant risks. The risks are graded according to the likelihood of their occurrence and the estimated impact of their occurrence. An increased likelihood of a risk occurring does not always have to mean something negative, but can in some cases also be seen as positive, for example in cases where the company assesses that the change tightens the requirements and thus increases the standard in the industry as a whole.

Risks are continuously monitored by Humana's Group management and in the work of the Board. Since Humana operates in Sweden, Finland, Norway and Denmark, the evaluation is based on the situation in the local markets, but is combined into a common description of the Group's risks.

Humana has chosen to divide the identified risks into four risk categories:

  1. Industry and market
  2. Operations
  3. Compliance, responsibility and sustainability
  4. Financial

Industry and market

Industry and market-related risks refer to external factors, events and changes in the markets in which Humana operates and which can affect the conditions for achieving the company's set goals. These are risks that Humana has limited opportunities to influence, but which Humana as a company needs to relate to. Not infrequently, there are two sides to every industry and market-related risk: a downside, i.e. a risk or threat, and an upside, an opportunity.

Here are the industry and market-related risks identified by Humana:

Increased industry regulation

The care industry is subject to extensive regulation in the form of laws and regulations at national, regional and local levels. Legislation, regulations and rules, which vary across the countries in which Humana operates, cover, among other things, the availability and accessibility of services, the quality of services, staff qualifications and obligations, and confidentiality provisions. The trend is for regulations to increase.

Risk management

Humana works with documentation, quality monitoring and competence development to ensure that the care services it delivers meet all requirements. Humana is at the forefront in this area and in some cases also conducts advocacy work for increased industry regulation. Humana's view is that clear regulations help to raise the quality and status of the care industry and benefit quality-oriented players like Humana.

Risk level

Likelihood - medium
Impact - medium

Political decisions aimed at limiting private providers in welfare and other political risks

Several political parties in the Nordic countries are questioning the privatization of care services and are pushing for restrictions on the ability to run private companies with profit and dividend requirements. If legislation were to be introduced that would mean that no or only limited profits would be allowed, that the pace of privatization is reduced or that the services that can be subject to privatization are limited, the business model would be negatively affected.

Risk management

Humana adds important value to society through its core business; at the individual level and by contributing to a healthy economy.
Humana has an ongoing dialog with key stakeholders. The company actively participates as a referral body in government investigations in the Nordic region and conducts active advocacy work through the industry organization Vårdföretagarna and its counterparts in Norway and Finland. In Denmark, Humana has only a small operation.

The Swedish government, together with the Liberals and the Center Party, has stated in the so-called January Agreement that there is a need for a diversity of actors in welfare. It will therefore not make proposals aimed at introducing profit restrictions for private operators. In Norway, there is an ongoing political debate on whether private operators in certain care segments should be restricted. In Finland, the debate mainly concerns welfare conditions, for example, increased staffing requirements have been introduced.

Risk level

Likelihood - low
Impact - high

Other political risks

The opportunities for private care providers are generally dependent on political decisions made by municipalities, regions and state authorities, and changes in policy and political governance can have consequences. In all countries where Humana operates, the company is exposed to political risks.

Risk management

Humana works continuously with knowledge acquisition and relationship building, including through the industry organization Vårdföretagarna and its counterparts in Norway and Finland. The company has a high level of expertise in care and, even in the event of changes, is well placed to remain a strong and significant care provider.

Risk level

Likelihood - medium
Impact - medium

Changes in the conditions for personal assistance and in the compensation model and compensation level

In the Personal Assistance (Sweden) business area, Humana receives reimbursement from the Swedish Social Insurance Agency and municipalities. The standard compensation is determined annually through the budget bill. There is a risk that the standard rate will not compensate for cost increases. There is also a risk of clawbacks.

There is also a more general discussion of a number of issues in politics linked to the design of assistance conditions and compensation. In 2019, the LSS inquiry was presented and in 2020 an inquiry on personal assistants was published. These inquiries have not yet led to any changes in the conditions for personal assistance.

New political decisions may affect Humana's future profitability, but also the company's ability to recruit.

Risk management

Humana maintains an ongoing dialog with key stakeholders and influencers as well as submitting responses to investigations. The company also works continuously to ensure flexibility and room for maneuver in the organization so that there is a readiness for major changes in the conditions for personal assistance.

For 2021, the increase in the flat-rate compensation for assistance is 3.5 percent. This is higher than in previous years and is positive for everyone with personal assistance as well as for Humana and other providers as it reduces the risk of negative margin pressure that has been in recent years, which has negatively affected the industry.

Risk level

Probability - medium
Impact - medium

Change in demand and prices

Prices for publicly funded care are decided by local, regional and national authorities. This means that prices are not driven solely by market forces such as supply and demand.

The need for care financed by state and municipal funds is increasing in society. An increased need for care should increase the demand for private care services and, for many years, purchases from private care companies have increased in nominal terms each year. At the same time, there is an increased risk of price pressure due to budgetary constraints as municipalities' tax revenues do not grow as much as their costs to meet the increasing needs. A reduction in demand for private care services or price pressure would have a negative impact on Humana's revenues and profitability.

Risk management

Humana adds important value to society through its core business; at the individual level and by contributing to a healthy economy.
Humana focuses on high quality in care services and conducts systematic quality work. Quality is continuously measured through our quality index, Humana Quality Index, HQI. Humana also has a high degree of specialization and customization to be competitive.

The company also works to be cost-effective, saving the public sector in the Nordic region SEK 1 billion annually by being more cost-effective than the public sector is when it provides similar care itself.

Risk level

Likelihood - medium
Impact - medium

Operations

Operational risks mainly relate to internal factors and events that could damage the company's operations and brand. Humana's reputation is central to the trust of its customers, clients, commissioners and employees. Negative publicity about private care providers or a serious incident within the Group's operations could have a negative impact on the company's operations and results.

The following are the operational risks identified by Humana:

Risk of not being able to recruit the right employees

Humana's operations are highly labor-intensive and the company is dependent on being able to attract, hire and retain qualified staff on market terms. Skills requirements are often high, but this varies between business areas. In Personal Assistance, formal skills requirements are low, while some of the services offered in the individual and family activities require a high level of competence and specialization. Humana's quality depends on the ability of its staff to make the right decisions and have the right attitude in their daily work. At the same time, welfare is facing increasing recruitment needs as the number of individuals in need of care will increase in the coming years, while there are large retirements and the number of people of working age is relatively decreasing. New staffing requirements in elderly care in Finland will increase competition for labor there. If Humana does not succeed in attracting the right staff, it may affect the quality of the company's services and the company's growth opportunities.

Risk management

Humana's operations are highly labor-intensive and the company is dependent on being able to attract, hire and retain qualified staff on market terms. Skills requirements are often high, but this varies between business areas. In Personal Assistance, formal skills requirements are low, while some of the services offered in the individual and family operations require a high level of expertise and specialization. Humana's quality depends on the ability of its staff to make the right decisions and have the right attitude in their daily work. At the same time, welfare is facing increasing recruitment needs as the number of individuals in need of care will increase in the coming years, while there are large retirements and the number of people of working age is relatively decreasing. New staffing requirements in elderly care in Finland will increase competition for labor there. If Humana does not succeed in attracting the right staff, this could affect the quality of the company's services and its growth opportunities.

Risk level

Likelihood - low
Impact - high

Dependence on licenses and the right professional skills

Humana's operations and growth are dependent on the company being able to obtain and retain permits from social services and authorities to conduct care activities. The permits are usually linked to people with the right professional skills; if they leave, Humana needs to apply for new permits. Some of Humana's permits are linked to specific properties; if these activities are moved, Humana needs to apply for new permits. In Sweden, ownership and management review is part of the assessment and an administrative fee is charged per permit applied for at the Inspectorate for Health and Social Care, IVO, and in case of changes. Permits are also required in Finland, Norway and Denmark to run Humana's operations. Processing times with the authorities are often long. This means that there is a risk that the start-up of operations will be delayed, thereby increasing costs.

Risk management

Humana works to have efficient processes and to be close to authorities, social services and government agencies to facilitate the processing of applications.

Risk level

Probability - medium
Impact - medium

Dependence on framework agreements

Humana's activities are often dependent on framework agreements. The assessment is that having framework agreements has become more important and will become even more important in the future. There is a risk that framework agreement procurements include conditions that can be challenging, such as low reimbursement levels, and procurements can be based on price conditions rather than quality aspects. The framework agreements Humana concludes to run its own operations usually (but not always) do not contain any volume commitments from the municipality, which means that the volume that falls out of such agreements is uncertain. The framework agreements have limited terms and if Humana cannot meet the requirements set out in the framework agreements, the agreements can be terminated prematurely. As Humana enters into long-term leases for premises used in its operations, the company faces a financial risk that operating income may be lower than the personnel and rental costs associated with the operations.

Risk management

Humana participates in framework agreement procurements and prioritizes procurements that focus on quality. The company has high ambitions in terms of the quality of its service delivery (high competence and good treatment results) as well as close cooperation with the clients, the municipalities. Humana works daily to optimize the occupancy level within the Group's own operations and to be cost-effective and provide good care for our tax money.

Risk level

Likelihood - medium
Impact - medium

Risks related to expansion and growth

Humana is a growth company that intends to continue to grow primarily through organic growth and also to some extent through acquisitions. Humana's future growth is affected by the company's ability and competence to drive organic growth by attracting customers and employees and successfully driving organic growth projects, including by ensuring access to suitable properties. In parallel, the company also needs to be able to adapt its operations if the needs and requirements of clients, customers and authorities change, which may entail adjustments to operations.

The ability to grow by making selective acquisitions is affected by the company's financial position and ability to identify suitable acquisition targets and negotiate purchase prices and terms. It is also crucial to integrate completed acquisitions into existing operations in a beneficial way. There are business, tax and financial risks associated with growing, acquiring and integrating companies.

Risk management

Humana works to carefully evaluate organic growth projects and to find competent business partners. The company applies selectivity in acquisitions and focuses on efficient integration processes.

The underlying growth in most of our submarkets combined with increased industry demands and a fragmented care market creates opportunities for both organic growth and to participate in further consolidation of the industry through selective acquisitions.

Risk level

Likelihood - medium
Impact - medium

External cyber threats

Cyber threat or cyber security threat is a malicious act aimed at damaging data, stealing data or disrupting digital life in general. Cyber threats include, for example, viruses, denial-of-service attacks, ransomware (malicious software that encrypts files or entire hard disks and then demands a ransom to unlock the encrypted files) and other types of cyber attacks. In recent years, the number of cyber-attacks and threats to corporate information systems has increased dramatically.

Risk management

Humana's risk management includes work on risk prevention, business intelligence, ongoing updates of systems, user training and monitoring of suppliers' compliance with agreed security levels. In addition, there is ongoing monitoring of logs, external interfaces and the threat situation.

Risk level

Likelihood - medium
Impact - high

IT system limitations and unauthorized access to sensitive personal data

Humana handles a wide range of information in the form of personal, social, medical and business-critical data. Interruptions or disruptions to IT systems, including sabotage, computer viruses, operator errors or software failures, can have a negative impact on operations. There is a risk that operations may be limited to IT and system failures.

Risk management

Humana works systematically to minimize the risk of disruption through administrative, logical and physical work with IT security. This involves ongoing system development and monitoring, as well as refining systems and procedures with operating partners and skills development. Improved requirements management, project governance/management, testing, management planning. To control unauthorized access to sensitive personal data, logging and random checks are carried out.

Risk level

Likelihood - medium
Impact - high

Legal processes and investigations

Humana may be adversely affected by court rulings, settlements and costs associated with legal proceedings and investigations. There is a risk that Humana could be subject to legal action due to alleged malpractice or medication errors in its operations. In the event of malpractice, Humana may incur costs for damages or compensation.

Risk management

Humana has patient insurance and liability insurance for clients. The company has systematic quality work and continuously reviews routines, processes and that it has the right competence. If necessary, there are legal partners.

Risk level

Likelihood - low
Impact - small

Communicable diseases, epidemics and pandemics

Communicable diseases occur in the community, common ones include influenza and gastroenteritis (stomach flu or winter vomiting). These infections can affect anyone, but the situation is most difficult for people in risk groups: frail elderly people, people with disabilities or people with several different diseases. Humana's activities include customers and clients in risk groups. Infectious diseases can also mean that several employees fall ill at the same time, which can make it difficult to staff the activities. If there is an epidemic (more cases of an infectious disease than expected) or pandemic (a widespread spread of infectious disease in several countries, such as Covid-19), the risk of individuals being affected increases, as does the risk of problems with the supply of skills. In addition, in the event of an epidemic/pandemic, there is a risk of revenue and costs being affected, for example due to lower occupancy or sick leave.

Risk management

Humana's management system contains guidelines and procedures for how the operations should prevent and manage various infectious diseases. The company also has procedures for establishing a crisis organization if necessary in order to further minimize the spread of infection and impact, both at the individual level and the impact on the company.

During 2020 and the first half of 2021, Humana has managed the ongoing COVID-19 pandemic, primarily through ongoing risk analysis and preventive measures to reduce the spread of the virus and through, among other things, cohort care when infection is detected. To support this work, a dedicated crisis organization has been established.

Risk level

Likelihood - high
Impact - medium

Negative publicity as a result of an operational incident in the company or in the industry

Humana's reputation is crucial for good relations with both current and potential customers and clients, with local and regional authorities and with supervisory authorities. The reputation of the industry at large also affects Humana. If an incident were to occur in Humana's operations or in the operations of another private care provider, whether through negligence or intentional action, it could result in negative publicity that harms the industry as well as Humana or the company in question in the form of brand damage and loss of customers and thus revenue.

Risk management

Humana focuses on high quality, continuous improvement, skills development and training, and values-based work. Humana has a well-established internal communication plan and is prepared for crisis management. Humana regularly reports serious deviations on the company's website and aims to be transparent and accessible to the media. The company also works actively through its member organization Vårdföretagarna and similar organizations in other Nordic countries.

Risk level

Likelihood - medium
Impact - medium

Compliance, responsibility and sustainability

Humana's operations are subject to extensive regulation. The company must comply with laws, ordinances, regulations and other rules at national level in the countries in which we operate. Furthermore, Humana's operations are dependent on its ability to obtain and maintain various licenses. For example, Humana is subject to data protection laws such as the General Data Protection Regulation (GDPR), the Swedish Patient Data Act and corresponding legislation in Finland, Norway and Denmark. The regulations require that there are systematized and secure procedures in place for handling and storing personal data.

Here are the compliance risks identified by Humana linked
to laws and regulations:

Violation of data protection laws

Humana's operations are subject to comprehensive data protection laws such as the General Data Protection Regulation (GDPR) and the Data Protection Act. Legal requirements, regarding the processing and protection of personal data, place great demands on processes and security for processing, storing and deleting personal data and that data subjects are properly informed about how the company processes personal data. Violations of the GDPR can result in a very high penalty and damaged trust.

Risk management

Humana's data security policy sets out responsibilities and guidelines for employees' use of IT and data. There is ongoing work to improve Humana's processes, procedures and ongoing controls. This involves, for example, training and systematic improvement work on processes and procedures and investments in systems. The company also works actively with suppliers to ensure their compliance.

Risk level

Likelihood - low
Impact - high

Lack of quality affecting customer/client

There is a risk that employees do not follow Humana's procedures and instead develop their own approaches to clients and customers who then do not receive the treatment or intervention that has been decided. The risk can arise, for example, in the event of high staff turnover or when it is difficult to recruit staff or when there are shortcomings in leadership.

Risk management

Humana conducts extensive systematic quality work through our management system Parus. The work is secured by the company's quality organization and the guidelines for quality work can be found in Humana's quality policy. Internal controls are carried out in all operations. All employees have a duty to report deviations and grievances, which are systematically followed up and analyzed by the responsible manager. Clients have the opportunity to make complaints both openly and anonymously. There is a whistleblower function on Humana's website.

Risk level

Likelihood - medium
Impact - high

Work environment and safety

Health and social care is the sector with the highest number of occupational injury and illness claims caused by threats and violence. Humana's activities are subject to occupational health and safety regulations. Failure to comply with the regulations can lead to fines or penalties. The COVID-19 pandemic increases risks in occupational health and safety.

Risk management

Humana conducts systematic work on the work environment with action plans and control through regular safety rounds. The work is based on Humana's work environment policy. The company conducts continuous risk assessments from a work environment perspective and trains managers in work environment issues, including the issues that arise related to the current pandemic. To manage the pandemic, Humana has also established a special crisis organization to support the operations.

Humana applies collective agreements in all operations in the four countries where we operate.

Risk level

Likelihood - medium
Impact - medium

Violation of human rights

Humana's operations are subject to regulations regarding working conditions, health and safety, and freedom of association in the countries where we operate. Our commitment to human rights is underlined in our Code of Conduct as well as in our Supplier Code of Conduct where we express our support for, among other things, the Universal Declaration of Human Rights and the UN Guiding Principles on Business and Human Rights. The codes also provide guidance on identifying, preventing and mitigating human rights risks.

Risk management

To mitigate the risks of human rights violations, Humana works continuously to ensure compliance with national laws and regulations as well as international human rights provisions. Diversity and inclusion and respect for human rights is a matter of course and is also described in the company's Diversity and Inclusion Policy. Humana has active internal value-based work, with internal training, established procedures and a whistleblower function. Humana applies collective agreements in all operations in the four countries where we operate and the Group's Code of Conduct applies to all employees and operations.

In our work with suppliers, we have introduced (from 2021) a Supplier Code of Conduct. Most of Humana's suppliers and partners are located in the Nordics.

Risk level

Likelihood - low
Impact - small

Corruption and fraud

Humana's extensive operations involve a large volume of contracts with customers and suppliers. Contracts are signed and business decisions are made at various levels of the organization. With customers, which are often municipalities, individual customer contracts, framework agreements or construction contracts are signed. Procurement of suppliers takes place, for example, for strategic purchases and new construction. There is a risk that employees will act unethically in relations with customers and suppliers by, for example, accepting or giving bribes. There is also a risk that employees act fraudulently. Corruption and fraud can result in legal sanctions. Humana may suffer both financial and brand damage.

Risk management

Humana counteracts corruption and bribery as well as fraud through procedures and internal control and has, for example, a well-functioning authorization law with system support. A clear decision-making and authorization scheme facilitates and reduces the risk of decentralized responsibility for tenders, customer agreements and supplier contracts. At its core, there is a Code of Conduct for Humana's employees and, since the beginning of 2021, a Code of Conduct for suppliers. Humana also has a whistleblower function.

Risk level

Likelihood - low
Impact - small

Environmental risk

Humana affects the environment and climate primarily through car transportation and through the development and operation of homes. Operations include heating and electricity supply, as well as the purchase and handling of, among other things, food and drink, consumables and medicines. In individual and family care activities, the use of cars is necessary for the provision of our services.

Risk management

Humana strives to reduce the environmental and climate impact of its operations. This is also a strategic group goal. Humana's environmental work is based on our environmental policy. It defines climate efficiency and resource efficiency as guiding criteria. Environmental work is based on the principles of precaution and exchange. Each unit within Humana must constantly strive to work resource-efficiently to reduce environmental impact while reducing costs. A climate-smart travel policy applies to all employees. All employees must complete the company's digital sustainability training.

Risk level

Probability - low
Impact - small

Financial

The Group is exposed to various financial risks through its operations. The Group's financial policy for managing financial risks has been formulated by the Board of Directors and forms a framework of guidelines and rules in the form of risk mandates and limits for financial operations. Responsibility for the Group's financial operations and risk management is handled by the CFO in consultation with the Board and the CEO. The overall objective of the treasury operations is to provide cost-effective financing and to minimize negative effects on the Group's results as a result of market changes. The company's overall risks, including measures, are managed by the company's Audit Committee, which reports to the Board for evaluation and approval.

The following are the financial risks identified by Humana:

Liquidity and funding risk

Liquidity risk is the risk that the Group is unable to fulfill its payment obligations. Financing risk is the risk that the company may encounter difficulties in meeting the obligations associated with its financial liabilities.

Risk management

Liquidity and funding risk is managed centrally for the Group by the CFO. The Group's treasury policy sets the framework and guidelines for risk mandates and limits in treasury activities. To facilitate liquidity planning and liquidity management, the Group has credit facilities, such as overdraft facilities, and a cash pool. Humana also actively manages its liquidity by actively working with working capital. Focusing on cash flow and adapting to changing market conditions reduces the risk of not being able to fulfill the obligations under the financing agreements.

Risk level

Probability - low
Impact - medium

Interest rate risk

Humana's financial costs are affected by market interest rates. Changes in interest rates may increase Humana's borrowing costs and thus have a negative impact on the Group's earnings and cash flow.

Risk management

Derivative instruments can be used to manage interest rate risk. A gradual reduction in debt over the past year contributes to a slightly lower interest rate risk.

Risk level

Probability - low
Impact - small

Credit risk

Humana's credit risks and credit losses are predominantly attributable to accounts receivable and Humana's surplus liquidity. The credit risk for accounts receivable is that the outstanding receivables and uninvoiced services rendered to Humana's customers will not be paid. The credit risk for surplus liquidity is that the bank cannot fulfill its obligations.

Risk management

The majority of the Group's accounts receivable are from the state, municipalities and county councils, which are considered to have good creditworthiness. The risk of credit losses is considered low. Humana's surplus liquidity is invested at low risk in deposit accounts and agreements are only entered into with banks with high credit ratings.

Risk level

Probability - low
Impact - small

Currency risk

The Group operates in Sweden, Finland, Norway and Denmark and is therefore exposed to risks in the form of translation from euros and Norwegian kroner and, to a lesser extent, Danish kroner to Swedish kronor. Conversions are made at the average exchange rate for the financial year (in the balance sheet at the rate on the balance sheet date). Furthermore, currency risk arises from business transactions, recognized assets and liabilities, and net investments in foreign operations.

Risk management

Humana's exposure to foreign currencies is partly balanced by borrowing in the local currency.

Risk level

Probability - medium
Impact - small