The objective of the internal monitoring for which the Board of Directors and the operative management are responsible is to ensure efficient, profitable operations, reliable information and compliance with regulations and business principles. Risk management is an integral element of the Group’s controls and monitoring of operations.
The Board of Directors continuously monitors the Group’s trend of earnings and its financial position by means of the internal reporting system. The internal control system consists of detailed internal accounts, which are reconciled with the business accounts. The Group’s financing and liquidity situation are assessed continuously.
The outside Auditors continuously evaluate the internal control system in their review reports to the Board.
The market for cruises and ferry services in the Baltic Sea is stable but subject to tough competition. Political decisions may change Viking Line's operating conditions, with potentially adverse consequences to its business operations. Åland's special tax status, which makes duty- and tax-free sales possible on services to and from Åland, is nevertheless permanent. The European Commission's guidelines for the promotion of seafaring, which makes the net salary system for shipboard employees possible, are in effect until further notice. These guidelines currently appear likely to be extended without major changes.
The Group's business operations are dependent on functioning logistics and computer systems. Disruptions in traffic or data communications may have an adverse impact on the Group's earnings. Viking Line endeavours to minimize the risk of lengthy unplanned service interruptions by means of continuous vessel maintenance, a well-developed safety and security system, training and regular drills. Risks in information management are minimized by developing appropriate security systems and alternative working methods as well as efforts to ensure the reliability of computer systems.
The Group's vessels are recognized in the balance sheet at a carrying amount of EUR 324.5 M on December 31, 2015. The vessels have hull and machinery and increased value insurance totalling EUR 598.0 M on December 31, 2015. In addition, all vessels have strike insurance, protection and indemnity (P&I) and Passenger Liability Regulation (PLR) insurance.
Fluctuations in bunker prices have a direct impact on the Group's earnings. In order to partly offset the risk of higher bunker prices, the Group has entered into fixed-price agreements related to a portion of its estimated bunker consumption during 2015 and 2016.
The Group is also exposed to various financial risks, among them fluctuations in currency exchange rates. Revenue is generated in euros and Swedish kronor. Most operational influx of cash and cash equivalents consists of euros. Prices of goods for sale and bunker are affected by foreign currencies, especially the US dollar. The Group endeavours to maintain good liquidity in order to be prepared to deal with adverse changes in operational cash flow.
The Group is exposed to price risk related to shares that are classified as "Investments available for sale". The value of the Group's shareholding in the insurance company Försäkringsaktiebolaget Alandia is established on the basis of the present value of future cash flows. The cash flow projection is based on a number of estimates and judgements that have a substantial impact on present value.
Further information about financial risk management can be found in Note 26 to the consolidated financial statements (see Viking Line's Annual Report, pages 72-73).
Maritime safety, security and sabotage risks are managed through the regulations in the International Safety Management Code (ISM) and the International Ship and Port Facility Security (ISPS) Code.