Risks

This is how we deal with risks

The Executive Board is responsible for managing the risks arising from Alcyone's strategy and activities. The directors of Alcyone's participation are responsible for identifying and managing risks, with the support of the financial control departments of their organizations.

In regular monitoring meetings between the Executive Board and the directors of the Alcyone participations, attention is paid to the identified risks and how they are managed.

Alcyone believes that risk management is a value-creating activity and aims to achieve a long-term sustainable business proposition. The Executive Board considers the management and control of strategic, operational, compliance, commercial, financial reporting and financial risks to be crucial in order to achieve the Alcyone objectives and to guarantee the continuity of the company.

The findings of the regular monitoring meetings with regard to risk management are discussed with the Supervisory Board.

The Executive Board defines the 'Risk Appetite', the level of risk that Alcyone is willing to take in the light of the achievement of the strategic objectives, based on the strategy, annual plan to be executed, code of conduct, core values of the companies, authorization schemes and procedures.

The extent to which Alcyone is willing to take risks in the pursuit of its objectives varies from risk category to risk and from company to company.

If there are changes in, for example, the working environment, laws and regulations, contractual agreements with customers, partners or suppliers, work equipment, activities, services, context analysis and advancing technologies, or if calamities have occurred, it will be assessed whether there is a need to adjust the risk analysis accordingly or to carry out a new risk analysis. In addition, the Management Review periodically assesses whether the risk analysis is still complete and correct and whether it needs to be adjusted. The effectiveness of the actions will be evaluated and, if necessary, risk owners will be identified to address new risks and opportunities. For the sake of completeness, the risk owners and actions are shown in the risk analysis. In the risk analysis, all risks are assessed on their significance. The significance value is based on probability X effect.

Measures to address risk may include risk avoidance, risk-taking to capitalise on an opportunity, removing the source of risk, changing the probability or consequences, spreading risk or retaining risk after informed decision-making. Opportunities can lead to adapting processes, introducing new services, entering new markets, and establishing new relationships with customers, partners, or suppliers.

Responsibilities

The Executive Board is ultimately responsible for the risk management and control systems. The Supervisory Board supervises this.

There are regular consultations between the Executive Board and the management of the operating companies. This mainly focuses on developments in the market and the identified risks. The Executive Board discusses the design and operation of the risk management and control system with the Supervisory Board on an annual basis. For each type of risk, appropriate control measures are taken to prevent or reduce the risk.

What kind of risks are involved?

Market risks

Alcyone's services are sensitive to developments in the market. The company has to deal with economic movements, sector-dependent trends and the dynamics of the labour market. In order to absorb economic fluctuations as much as possible, Alcyone spreads its activities. She also keeps a close eye on developments in individual market segments.

In order to work on the continuity of Sterope and Taygeta, the company invests in the knowledge and skills of its professionals. She also focuses on long-term relationships with her clients. In addition, Sterope has high quality standards with regard to the admission requirements of self-employed persons on its advice portal. In addition, Taygeta is critical when it comes to hiring external parties for the benefit of its clients.

Environment and climate risks

Social thinking about the environment and climate has become an important issue in recent years. Although Alcyone does not experience any direct impact on its services, it has been taking this into account in its business operations for years, for example by offering its employees alternative forms of transport and by focusing its purchasing policy on environmentally and climate-friendly products and the production of these products. The Board is of the opinion that the impact of climate-related risks has no material impact on the items and disclosures, including opinions and estimates in the financial statements.

Strategic risks

Strategic risks include macroeconomic conditions, geopolitical developments, competition and dependence on large customers. Monitoring and control through strategy updates and annual business reviews based on the annual plans of the management of the operating companies. Permanent attention is paid to efficient business processes and optimisation of the cost structure.

Operational risks

Operational risks are unexpected events that may occur within Alcyone's operational processes. Some may prevent the company from achieving its objectives. Others can damage reputation or put pressure on the customer relationship. These are risks due to:

• have sufficient qualitative self-employed workers available;

• disappointing quality;

• too low occupancy rates;

• productivity is too low;

• the loss of people in key positions;

• inadequately functioning ICT infrastructure;

• the risk of budget overruns and losses on projects.

Control measures that are taken include:

• quality-oriented intake procedure for admitting self-employed persons on the Sterope portal;

• continuous optimization of Sterope advice portal with a focus on performance and desired functionalities, both from the perspective of freelancers and from the perspective of the customer;

• the deployment of certified professionals, the management of customer contacts and satisfaction, as well as the continuous investment in the development of professionals;

• managing the productivity and employability of professionals, keeping the knowledge and skills of professionals up-to-date and, if there is no other option, saying goodbye to professionals;

• encouraging proactive and entrepreneurial behaviour;

• actively looking for improvements in the field of organisation and policy;

• keeping detailed project records and monitoring the progress of projects;

• standardised contract procedures;

• KPI analyses;

• monthly management reports;

• monthly monitoring meetings;

• physical visits to branches.

Financial risks

Financial risks range from not being able to meet payment obligations to not being able to attract financing. Liquidity and funding risks arise if Alcyone does not have sufficient financial resources at its disposal, or does so too late. Credit risk refers to the borrower's failure to meet its promised payments. This happens, for example, if customers do not fulfil their contractual obligations or do not fulfil them in full. The control measures taken by Alcyone include:

• timely invoicing;

• active management of the accounts receivable portfolio;

• active working capital management;

• standardized IT systems;

• internal control via business control;

• monthly reporting;

• monthly monitoring meetings;

• liquidity monitoring.

The notes to the consolidated financial statements include a more detailed explanation of the management of financial risks.

Reporting risks

Accurate, timely and complete reporting of financial and non-financial data is important for all Alcyone stakeholders. It ensures that the stakeholders maintain confidence in Alcyone and its business operations.

The control measures taken by Alcyone focus on the principles of valuation and profit determination as included in the statutory financial statements of Alcyone's operating companies. Also important is the audit by the external auditors.

Intangible assets and goodwill

At the time of the acquisition of Sterope, the customer files, Sterope portal and goodwill were identified and activated as a result. These items make up a significant part of Alcyone's balance sheet total.

Developments in the market and in the sectors in which Sterope provides its services may lead to changes in cash flows and as such have an impact on the valuation of these intangible assets. To mitigate this risk, Alcyone conducts an annual test at Sterope to assess whether there is an impairment change.

Compliance risks

Compliance means the combination of measures, rules and standards that manage risks. Compliance enables corporate responsibility and corporate governance. That is why Alcyone works with internal policies and procedures, an insider regulation and staff regulations that describe the rights and obligations of employees and employers.

Fraud can manifest itself in various forms, ranging from small-scale fraud to fraud that can jeopardize continuity. To mitigate this risk, the operating companies have set up their processes to prevent fraud. In addition, the management of Alcyone and the operating companies actively promote that a zero-tolerance policy applies to fraud.

The labour market is in the spotlight in society, especially when it comes to abuse and exploitation. In addition, a great deal of attention is paid to the excessive flexibilisation experienced, which leads to abuses and concerns about the financial support of social services, especially at the lower end of the labour market, when the "good risks" leave the system.

The Legislator has responded to this by enforcing the DBA Act (deregulation assessment of employment relationship) on 1 May 2016 and the Balanced Labour Market Act (WAB) on 1 January 2020 and continuing research into the future legal position of self-employed persons. Alcyone uses the services of freelancers at both Sterope and Taygeta and follows developments closely.

Hidden risks

A separate group is formed by "hidden" risks: risks that are currently not or insufficiently known. Or risks that seem minor now, but may be of real importance later. By setting up a risk management system, Alcyone can quickly identify and address these risks during the process. However, it is not possible to give absolute certainty about the achievement of the objectives set.

Identify and address risks quickly

Risk management and control

The risk management and control system helps Alcyone to determine the right balance between customer-oriented business and a risk profile acceptable to the company. Risk management and the internal control measures put in place help Alcyone to recognize and properly manage risks in time. In addition, they support the achievement of operational and financial goals. Finally, they contribute to complying with the applicable laws and regulations.

Continuous improvement

The risk management and control system shall be continuously evaluated and, if necessary, adjusted or improved. The risk management framework has been applied throughout the group. The primary responsibility for this lies with the operating companies. Risk assessments are integrated into the annual planning and monitoring cycle. If points for improvement are identified, they will be implemented. They are then tested again in the process of periodic evaluation. Different instruments are used for the internal risk management and control system. These can be divided into four groups:

1. Guidelines and consultation structures

The most important are:

• a corporate governance structure laid down in articles of association;

• financial reporting guidelines;

• scheduled periodic consultations between the Executive Board and the directors of Sterope and Taygeta on the progress of the operation;

• scheduled periodic consultations with the Supervisory Board on the most important risks and control measures (at least six times a year).

2. Reports

Monthly management reports provide insight into the realisation of the business objectives. Agreements have been made on how and when this will be communicated. Topics such as strategy, business plans, the main risks and results of the operating companies are discussed with the Executive Board. The latter then discusses this with the Supervisory Board, usually in the presence of the Sterope and Taygeta Boards.

The most important reports are about:

• Annual budget and business plans;

• Explanation of the execution of annual targets;

• Detailed monthly financial information. For example, about the results compared to budget and previous periods;

• Detailed and immediately available qualitative information. For example, about the number of registrations for the Sterope portal, the number of actual registrations for the Sterope portal, key figures for the first time match for the Sterope portal, the development of upcoming orders, the occupancy rate, the order book and the conversion of requests into assignments;

• Written accountability of management on accounts receivable position and personnel matters.

3. Internal control measures

A framework of internal control measures: this supports financial reporting and the procedures that underpin it. This framework is made up of:

• policy principles;

• strategic objectives;

• internal control.

4. Assessment and analysis

The Executive Board regularly assesses and analyses:

• Detailed and immediately available qualitative information. For example, about the number of registrations for the Sterope portal, the number of actual registrations for the Sterope portal, key figures for the first time match for the Sterope portal, the development of upcoming orders, the occupancy rate, the order book and the conversion of requests into assignments;

• strategic, operational, financial and compliance risks;

• the design and effectiveness of the internal risk management and control systems, as described in the risk management section.

These analyses took place with the boards of directors of both Sterope and Taygeta, but also bottom-up with account management and the teams during business planning processes and quarterly reviews. In addition, the Executive Board identifies and analyses trends and developments with those ultimately responsible for the business. The results of these analyses were shared with the Supervisory Board via business updates.