Corporate governance statement Cramo Group · 1 1 Corporate Governance Statement Corporate...

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CORPORATE GOVERNANCE

STATEMENT 2015

10 February 2016

CRAMO GROUP

Table of contents

1 Corporate Governance Statement 1

2 Board of Directors ......................................................................................................... 1

2.1 Audit Committee .................................................................................................... 6

2.2 Remuneration Committee ..................................................................................... 7

2.3 Shareholder’s Nomination Committee ................................................................... 8

2.4 Meeting Attendance of Board and Committee Members ....................................... 8

3 President and CEO ....................................................................................................... 9

4 Internal control and risk management regarding financial reporting ............................... 9

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1 Corporate Governance Statement

Corporate governance at Cramo Plc is based on Finnish law and the company’s Articles of Associ-

ation. Cramo complies with the rules of Nasdaq Helsinki Ltd and the Finnish Corporate Governance

Code 2010 published by the Securities Market Association. This Corporate Governance Statement

has been prepared in compliance with Recommendation 54 of the Finnish Corporate Governance

Code 2010. Cramo does not deviate from the Finnish Corporate Governance Code Recommenda-

tions. The Code is available in full on the Securities Market Association’s website, www.cgfinland.fi.

This statement has been approved by Cramo Board of Directors and it is issued separately from the

Board of Directors’ report. Cramo’s auditors, KPMG Oy Ab, have checked that the statement has

been issued and that the description of the main features of internal control and risk management

systems as described in the statement regarding Cramo Group’s financial reporting process is con-

sistent with the financial statements.

Further information about Cramo’s corporate governance matters can be found on the Group’s web-

site as well as in the Board of Directors’ report and the Corporate Governance section in the Annual

Report.

2 Board of Directors

Cramo’s Board of Directors has defined its roles and responsibilities in the Working Order of the

Board and in the Group’s Operating Principles. The latter acts also as the Corporate Governance

Manual for operative management. If necessary, the Board’s charter is revised and modified annu-

ally in conjunction with the first meeting of the Board after the election of its members at the Annual

General Meeting.

The Board of Directors is responsible for Cramo Group’s governance and appropriate management,

and for ensuring that the Group’s operations comply with relevant rules and regulations, Cramo’s

Articles of Association, and the instructions given by the General Meeting of Shareholders. The

Board of Directors is responsible for the Company’s strategic steering and for supervising the busi-

ness. It also decides on the Group’s key policies and practices, approves the business strategy and

budget, approves financial statements and interim reports, appoints and dismisses the President

and CEO, decides his/her compensation, and decides on the Group’s structure, acquisitions and

disposals as well as Company finances and investments. Additional information about the Board and

its committees can be found in the Annual Report and the Company’s website (www.cramo.com).

Information about the remuneration of the Board, committee members and Group management is

disclosed in the Remuneration Statement, which can also be found on the Company’s website.

http://www.cramo.com/Web/Core/Pages/Article.aspx?id=16965&epslanguage=EN

http://www.cramo.com/Web/Core/Pages/Article.aspx?id=16965&epslanguage=EN

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Members of the Board in 2015

At the Annual General Meeting 2015, the number of Board members was confirmed to eight. The

following people were re-elected to the Board of Directors: Ms Helene Biström, Mr Eino Halonen, Mr

Erkki Stenberg, Mr Leif Boström, Ms Caroline Sundewall and Mr Raimo Seppänen. Mr Joakim Rubin

and Mr Peter Nilsson were elected as new board members. The Board’s convening meeting elected

Ms Biström as Chairman of the Board and Mr Halonen as Deputy Chairman of the Board. There is

no specific order for the appointment of directors in Cramo Plc’s Articles of Association.

Helene Biström

Chairman since 2014. Board member since 2011. Chairman of the Remuneration Committee

Born 1962, Swedish citizen, M.Sc. (Eng.)

Deemed independent of the Company and its major shareholders.

Primary work experience:

Managing Director, Norrenergi AB, 2011-2014; Senior Executive Vice President

and Head of Business Group Pan Europe at Vattenfall AB 2009-2010 and Member

of Executive Group Management at Vattenfall 2007-2010; Vice Head of Vattenfall

Business Group Nordic 2007-2008; Head of the Nordic Heat Business unit at Vat-

tenfall 2004-2007.

Current positions of trust (31.12.2015):

Board chairman: Sveaskog AB

Board member: KTH Royal Institute of Technology

Eino Halonen

Deputy Chairman since 2007. Board member since 2003. Member of the Audit Committee.

Born 1949, Finnish citizen, B.Sc. (Econ.)


Primary work experience: President and CEO, Suomi Mutual Life Assurance Company 2000-2007.

Leif Boström

Board member since 2014. Chairman of the Audit Committee.

Born 1959, Swedish citizen, B.Sc. (Economics)

CEO, LKAB Minerals (since 2014)


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CFO, LKAB 2005-2014; Financial Manager, Minelco Group 1998-2005; Accounts

Manager, LKAB 1995-1998; Controller, LKAB 1992-1995; Purchasing Officer, NCC

1990-1992; Supervisor, NCC 1984-1990.


Board Chairman: LKAB Fastigheter AB, LKAB Wassara AB

Board member: Inlandsinnovation AB

Peter Nilsson

Board member since 2015. Member of the Remuneration Committee.

Born 1962, Swedish citizen, M.Sc. (Econ.)

Deemed independent of the Company and its major shareholders. Primary work experience: President and CEO, Sanitec Corporation, 2010–2015; CEO, Duni AB 2004–2007; various Senior Management positions, Swedish Match Group 1987–2003. Current positions of trust (31.12.2015): Board Chairman: Better Ski Apartments 2 AB, NKB 129 APS, Poleved Advisory, Poleved Industrial Performance AB Board member: Team Tråd & Galler Holding AB, JH Tidbecks AB, Signtronic Produktion AB, Kylpanel i Nassjö AB, Navibus AB, Wermer Fövaltning AB

Joakim Rubin

Board member since 2015. Member of the Audit Committee.

Born 1960, Swedish citizen, M.Sc. (Industrial Engineering and Management)

Deemed independent of the Company, but not independent of a major share-holder.

Primary work experience: Founding Partner, Zeres Capital AB; Senior Partner, CapMan Group 2008-2015; several positions e.g. Head of Corporate Finance and Debt Capital Markets, Han-delsbanken Capital Markets 1995 – 2008.

Current positions of trust (31.12.2015): Board member: ÅF AB

Raimo Seppänen


Born 1956, Finnish citizen, Civil Engineer

Head of Housing Repairs, YIT Construction Ltd., Apartment Houses Metropolitan

Area unit (since 2006)

Deemed independent of the Company, but not independent of its major sharehold-

ers.

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Specialist (Structural technology), The Helsinki Housing Production Bureau (ATT),

2000-2006; General Site Manager, Head of Site Management for renovation and

residential construction, Haka, Skanska, 1987-2000.


Board Chairman: Rakennusmestarien Säätiö

Erkki Stenberg


Born 1950, Finnish citizen, undergraduate of agriculture and forestry

Senior Advisor: LVI-Dahl Ltd


Primary work experience: CEO, LVI-Dahl Ltd 1995-2012; CEO, Suomen LVI-Tukku Ltd 1984-1994; Various positions, Huber Ltd, 1976-1983. Current positions of trust (31.12.2015): Board Chairman: QMG Partners Oy Board member: Paperipalvelu Koskimo ja Rännäli Oy

Caroline Sundewall

Board member since 2014. Member of the Audit Committee.

Born 1958, Swedish citizen, MBA

Independent Business Consultant, Caroline Sundewall AB (since 2001)

Deemed independent of the Company and its major shareholders. Primary work experience: Business Commentator, Finanstidningen, 1999 – 2001; Editor and Commentator, Sydsvenska Dagbladet (Business section) 1992 – 1999 and Affärsvärlden 1989-1992; Business Controller, Ratos AB, 1989 -1992.

Current positions of trust (31.12.2015): Board Chairman: Cloetta AB Board Member: Hemfosa AB, Mertzig Asset Management, Elanders AB

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Work of the Board of Directors in 2015

Cramo’s Board meets regularly, according to a planned schedule. In 2015, the Board of Directors

met nine times. One meeting was held per capsulam. Member attendance at the meetings is pro-

vided in a table on page 8. The figure below outlines the Board’s operating calendar.

In 2015, Cramo continued the implementation of its strategy through must-win battles and completed

performance improvement actions in certain business units. Cramo also appointed a new President

and CEO who took up the position on 1 January 2016. In addition, Cramo and completed selected

acquisitions to strengthen its local operations. All the issues mentioned above involved the work and

control of the Board in 2015.

Two permanent committees, the Audit Committee and the Remuneration Committee, assist the

Board of Directors. The Board elects the committee members and appoints the committee chairmen.

A quorum is more than half the members. Members are appointed for a one-year term of office,

which expires at the end of the first Annual General Meeting following the election. The Board con-

firms the central duties and operating principles of both committees in a written charter.

Q2

– Review of Group’s and Operating Companies’ performance, review of financial forecasts

– Assesses business development issues

– Approval of investment releases, acquisitions and disposals as well as structural issues

– Approval of interim report

– Approval of possible finance issues

Q3






– Review and approval of Group budget for the next year

– Board’s self-assessment

Q4

– Review and approval of financial statements and external auditor’s report

– Review and approval of Remuneration Committee’s outcome proposal pertaining to the incentive schemes of management and key employees

– Commencement of strategic planning period

– Approval of Corporate Governance Statement and Remuneration Statement

– Preparations for the Annual General Meeting



– Approval of investments releases, acquisitions and disposals as well as structural issues


Q1

– Review and approval of Group‘s key policies and practices

– Review and approval of Group strategy and must-win battles






Follow-up of

strategic

outcomes

and the

previous

financial

periods

Strategy,

execution and

business

development

Planning of

the following

financial

period

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In addition, the General Meeting of Shareholders of Cramo Plc resolved to establish a Shareholders'

Nomination Committee in 2015, in accordance with the proposal of the company's Board of Direc-

tors. The main content of the charters of the Board’s Audit Committee and Remuneration Committee,

and the Shareholders’ Nomination Committee, is outlined in the next chapters.

2.1 Audit Committee

The Audit Committee assists the Board of Directors in its supervisory responsibilities. In line with the

Finnish Corporate Governance Code, the Audit Committee has the following duties:

monitoring the reporting process of financial statements;

supervising the financial reporting process;

monitoring the efficiency of the Company’s internal control, internal audit, and risk management

systems;

reviewing the description of the main features of the internal control and risk management sys-

tems regarding the financial reporting process, which is included in the Company’s Corporate

Governance Statement;

monitoring the statutory audit of the financial statements and consolidated financial statements;

evaluating the independence of the statutory auditor or audit firm, particularly the provision of

related services to the Company to be audited;

preparing the proposal for resolution on the election of the auditor, and;

assessing the effects of any exceptional or significant business transactions.

Until 30 March 2015, the Audit Committee was chaired by Mr Eino Halonen, with Mr Leif Boström,

Mr Victor Hartwall and Ms Caroline Sundewall as committee members. At its constitutive meeting

on 31 March 2015, Mr Leif Boström was appointed Chairman of the Audit Committee and Mr Eino

Halonen, Mr Joakim Rubin and Ms Caroline Sundewall were elected as members. Mr Boström, Mr

Halonen and Ms Sundewall are deemed independent of the Company and its major shareholders.

Mr Rubin is deemed independent of the Company, but not independent of its major shareholders.

The Audit Committee met five times in 2015. Member attendance at the meetings is provided in a

table on page 8. The following figure outlines the Audit Committee’s operating calendar.

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2.2 Remuneration Committee

The Remuneration Committee is tasked with preparing a proposal to the Board of Directors for the

President and CEO’s appointment and his/her employment terms. The Remuneration Committee

prepares and evaluates matters regarding the remuneration and other financial benefits of the Pres-

ident and CEO as well as the Group management team and makes sure that the remuneration prin-

ciples are appropriate. It also prepares matters regarding the Company’s compensation systems

including profit-based and long-term incentive schemes and allocation of these incentives amongst

Cramo’s personnel. The Company’s strategy, must-win battles and long-term financial goals are

taken into account when deciding the remuneration schemes. Further information about compensa-

tion can be found in the Company’s Remuneration Statement. The committee answers any questions

related to the Remuneration Statement at the Annual General Meeting.

Until 30 March 2015, the Nomination and Compensation Committee was chaired by Ms Helene

Bistöm, with Mr Raimo Seppänen, Mr Erkki Stenberg, Mr Peter Therman and Mr Tom von Weymarn

as members. At its constitutive meeting on 31 March 2015, Ms Helene Biström was appointed Chair-

man of the Remuneration Committee and Mr Peter Nilsson, Mr Raimo Seppänen and Mr Erkki Sten-

berg were elected as members. Ms Biström, Mr Nilsson and Mr Stenberg are deemed independent

of the Company and the major shareholders. Mr Seppänen is deemed independent of the Company,

but not independent of its major shareholders. Mr Therman and Mr von Weymarn were not members

of the Board of Directors.

The Remuneration Committee met four times in 2015. Member attendance at the meetings is pro-

vided in the table below.

Q2

Q3

Q4

– Review of quarterly f inancials, treasury issues and cash f low

– Review of Financial Statements Bulletin

– Supervise and monitor f inancial reporting process related to annual accounts

– Review of annual f inancial statements

– Review external audit outcomes and Audit Memorandum

– Review risks and risk management issues related to the Financial Statements

– Review and approve other matters pertaining to the Audit Committee

Q1


– Review of interim report

– Discuss the annual external audit plan w ith the responsible auditor. Approve the plan, assign separate evaluation activities as considered appropriate

– Review findings from internal audit

– As necessary, review and approve changes in Treasury policy


Quarterly procedures

• Supervise and monitor the

financial reporting process of Interim reports

• Follow-up of financial position

by reviewing Interim reports

• Monitor efficiency of Cramo’s

internal control, internal audit and risk management systems

• Evaluate compliance with laws and regulations

• Communicate with External

Auditor and review the reports prepared for the Audit

Committee– Review of quarterly f inancials, treasury issues and cash f low





– Review findings from Q3 hard close external audit

– Review findings from internal audit

– Review and approve Internal audit plan for the next year

– Review impairment and asset valuation


http://www.cramo.com/upload/Corporate%20site/Investors/Governance/Remuneration%20statement%20_update%20051010%20WEB.pdf

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2.3 Shareholders’ Nomination Committee

The General Meeting of Shareholders of Cramo Plc, held on 31 March 2015, resolved to establish

a Shareholders' Nomination Committee for an indefinite period, in accordance with the proposal of

the company's Board of Directors. The Nomination Committee consists of maximum four mem-

bers, of which maximum three represent the company's largest shareholders who, on the last busi-

ness day of August preceding the next Annual General Meeting, hold the largest number of votes

calculated of all shares in the company. Should a shareholder not wish to use its nomination right,

the right may be transferred by the Chairman of the Board of Directors to the next largest share-

holder who would otherwise not have a nomination right. The Chairman of the Board of Directors

shall be a member of the Nomination Committee. The term of office of the members of the Nomi-

nation Committee expires annually when the new Nomination Committee has been appointed. The

Committee is responsible for preparing annually proposals to the Annual General Meeting for the

election and remuneration of the members of the Board of Directors.

In 2015, the shareholders who wished to participate in the work of the Committee nominated the

following members: Mikael Moll, Partner, Zeres Capital; Ari Autio, Member of the Board of Direc-

tors of foundation, Rakennusmestarien Säätiö and Matti Rusanen, Head of Equity Investments and

Funds, Ilmarinen Mutual Pension Insurance Company. In addition, the Chairman of Cramo Plc's

Board of Directors Helene Biström was a member of the Shareholders' Nomination Committee. Mi-

kael Moll was elected as the Chairman of the Nomination Committee.

2.4 Meeting Attendance of Board and Committee Members

The following table presents Cramo’s Board and Committee meeting attendance in 2015.

Name Position Board meetings

Audit Committee Remuneration Committee

Helene Biström Chairman 9 of 9 - 4 of 4

Eino Halonen Deputy Chairman

8 of 9 5 of 5 -

Leif Boström Member 9 of 9 5 of 5

Peter Nilsson from 31 March

Member 8 of 8 - 3 of 3

Joakim Rubin from 31 March

Member 8 of 8 4 of 4 -

Raimo Seppänen Member 9 of 9 - 4 of 4

Erkki Stenberg Member 8 of 9 - 4 of 4

Caroline Sundewall Member 9 of 9 5 of 5 -

Victor Hartwall until 30 March

Member 1 of 1 1 of 1

Peter Therman until 30 March

External Committee Member

- - 1 of 1

Tom von Weymarn until 30 March

External Committee Member

- - 1 of 1

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3 President and CEO

Cramo Plc’s managing director, who also acts as the President and CEO, is in charge of the Com-

pany’s day-to-day management in accordance with the Finnish Companies Act and related legisla-

tion, instructions and orders given by the Board of Directors. Further information regarding the Pres-

ident and CEO is available in the Annual Report and on the Company’s website.

Vesa Koivula

President and CEO from 2003 until 31 December 2015

Born 1954, Finnish citizen, M.Sc. (Eng.)

Primary work experience: Managing Director, Fiskars Inha Ähtäri Works 2001-2003 and Vice

Managing Director 1995-2001; Managing Director, Morus Oy 1992-1995.

Other positions of trust: Board Chairman: European Rental Association (ERA) Board member: Marinetek Oy, Hämeen Laaturemontti Oy,Vestelli Oy

Leif Gustafsson President and CEO from 1 January 2016 Born 1967, Swedish citizen, Construction Engineer Employed by Cramo since 2016 Primary work experience: CEO, Stena Recycling International 2012-2015; CEO, Stena Recy-cling AB, 2008 – 2012; CEO, YIT Sverige AB, 2005 – 2008; Division manager, YIT Sverige AB, 2003 – 2005; Division manager, ABB Con-tracting 1999 - 2003. Other positions of trust: Member of Board of Trustees: SNS (Studieförbundet Näringsliv och Samhälle)

4 Internal control and risk management regarding financial reporting

Introduction to internal control and risk management at Cramo

Internal control over financial reporting is part of the overall internal control system at Cramo, which

is described in the Annual Report and on the Company’s website. The Enterprise Risk Management

(ERM) framework, tailored to Cramo Group’s business needs, provides the overall framework for the

Group’s internal control and risk management. The ERM framework is thus an integral part of the

Group’s internal control environment and monitoring and control structure.

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Internal control over financial reporting strives to provide reasonable assurance that the Group’s

financial reporting is reliable and that external financial reporting is prepared in accordance with

legislation, International Financial Reporting Standards (IFRS) and other requirements set for listed

companies.

Financial reporting process at Cramo

Group reporting is based on the HFM Hyperion consolidation and reporting system facilitating com-

mon control requirements for all operating companies (OpCos) and legal entities reporting to the

Group. Subsidiaries submit their figures to the reporting system for consolidation. The reported fig-

ures are reviewed in subsidiaries as well as by Group accounting. The Group Finance and Develop-

ment function maintains the Group’s aggregated chart of accounts. The target is that all Cramo

countries share common business and financial reporting processes.

Information relevant to financial reporting is identified, accessed, processed and distributed in ac-

cordance with Cramo’s processes and procedures. In financial reporting, the Controller’s Manual,

financial guidelines and IFRS accounting principles (as adopted by the European Union) set the

standards for financial reporting as well as accounting policies and reporting procedures at Cramo.

These documents are updated regularly and communicated throughout the Group. Other internal

policies and rules related to the financial reporting process include the Treasury Policy, Matrix of

Authorisations and Approval Limits Granted as well as the Code of Conduct. Information about in-

ternal financial guidelines, their updates and schedules is distributed regularly to all employees con-

cerned.

The financial reporting process and its procedures are harmonised through the work of Country

Group controllers, whose daily control work increases the reliability of the financial reporting process.

The Group’s financial guidelines are developed and updated on a continuous basis.

Roles and responsibilities

The Board bears ultimate responsibility for the appropriate arrangement of internal control over fi-

nancial reporting. The Board supervises and approves annual financial statements and interim re-

ports. The Audit Committee assists the Board of Directors in overseeing the effectiveness of estab-

lished internal control and risk management principles. These duties are accomplished by supervis-

ing the accounting and reporting processes as well as by an audit of the financial statements to

ensure the quality and integrity of the financial statements and related disclosures. In practice, the

President and CEO and OpCo managers are in charge of performing internal control activities for

financial reporting. They are supported in this task by the CFO, the Group Finance and Development

function and OpCo financial management.

The Group’s President and CEO is responsible for maintaining an effective control environment by

ensuring implementation of internal control and risk management processes and their operational

effectiveness. The President and CEO also ascertains that the Company’s accounting practices

comply with legislation and that financial matters are handled in a reliable manner. Senior managers

assign responsibility for establishing more specific internal control policies and procedures to per-

sonnel responsible for the functions of the unit. Management and employees are assigned appropri-

ate levels of authority and responsibility to facilitate effective internal control in financial reporting.

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Risk assessment and control activities

Cramo has established objectives for reliable financial reporting in order to identify financial reporting

risks. Within the risk assessment process, Cramo identifies and analyses risks to achieving financial

reporting objectives as a basis for determining how those risks should be managed and mitigated.

The risk assessment process has been extended to also take into consideration the potential for

material misstatement due to fraud.

Control activities are linked to risk assessment, and specific actions are taken to address risks to

achieving financial reporting objectives. The risks identified related to financial reporting are man-

aged through control activities which are set throughout the organisation, at all levels and in all func-

tions. Financial officers and their staff, whose control activities cut across, as well as up and down,

the Group’s operating and other units, are particularly important. Cramo’s Group-wide controls in-

clude a variety of activities such as approvals, authorisations, verifications, reconciliations, reviews

of operating performance, safeguarding of assets and segregation of duties.

Monitoring

In order to ensure the effectiveness of internal control regarding financial reporting, monitoring is

conducted by the Board, the Audit Committee, the President and CEO, the CFO and the Group

Finance and Development function, Internal Audit, the Group management team and OpCo manag-

ers and controllers. Follow-up is accomplished through on-going monitoring activities, separate eval-

uations or a combination of the two.

The Audit Committee approves the charter for the Group’s Internal Audit and the annual audit plan

as well as assesses its operations. As part of the Internal Audit plan, the Group’s Internal Audit (IA)

function also performs independent audits of Cramo’s financial reporting process and assesses the

effectiveness of Cramo’s controls at the Group level and in the OpCos. The results of audit assign-

ments are reported regularly to the Audit Committee, the CFO and Group management. These re-

sults are also shared with the Group’s external auditors, and internal activities are aligned with the

suggestions presented by the external auditors. Furthermore, the Group Finance and Development

function monitors the adequacy and effectiveness of Cramo’s control activities and ensures that

external reporting is correct, timely and in compliance with regulations. OpCo managers and con-

trollers ensure compliance with the Group’s financial reporting guidelines along with local, state and

national budgetary reporting requirements and that local external reporting is correct and timely.

On-going monitoring activities include the follow-up of monthly financial reports relating to the

budget, forecasts and other targets, follow-up of business plans, monitoring of new plans and follow-

up of internal and external projects. The scope and frequency of separate evaluations depend pri-

marily on an assessment of risks and the effectiveness of on-going monitoring procedures and con-

trol activities. Internal control deficiencies are identified and communicated in a timely manner to the

parties responsible for taking corrective action, as well as to management, the Audit Committee and

the Board as appropriate. Implementation and control of financial and other business targets are

monitored through Group-wide financial reporting and through regular operating company Board

meetings as well as management and controller meetings.

12

Additionally, Cramo’s CFO team meets on a regular basis to monitor and review Group and OpCo

competencies and resources in financial reporting, the status of on-going projects and areas for

further development in financial matters. Chaired by the CFO, the Financial Steering Group meets

about quarterly to review and assess the progress of the Finance and Development business plan

and the most important on-going development projects. The Treasury Committee similarly meets to

assess the Group’s finance issues including finance-related risks, cash flow, currency matters and

the adequacy of finances. The Group accounting team, in turn, meets regularly to review the quality

and improvement needs in internal and external financial reporting. Country Group controllers meet

in monthly meetings to analyse the financial performance and reporting of Operating Companies.

Cramo’s Financial Coordination Group (FCG) conducts a biannual or annual meeting to discuss

development needs in the financial reporting process and the controller function concerning the

Group as a whole. The FCG consists of Cramo’s Finance and Development function members and

OpCo financial managers and controllers. Issues examined include improvement requirements in

control activities, development of controllers’ work, current issues regarding annual reporting, and

identified enhancement needs related to the financial reporting platform.

The Board of Directors of Fortrent is responsible for the operative steering of the associated com-

pany Fortrent Oy operating in Russia and Ukraine. Fortrent Oy has its own corporate governance

principles. Cramo monitors the financial performance of Fortrent and its development on a monthly

basis. Fortrent steering group controls the shareholder interests and financing of Fortrent, meeting

at least bi-annually, with the Group’s CEO and CFO as members from the Cramo side.

General development activities in internal control and risk management in 2015

The Group management team continued its work in focusing on customers and in driving operational

excellence. Delivery precision and fast problem-solving were emphasised throughout all organisa-

tional levels in order to strengthen the Cramo brand and corporate culture. Pricing structures and

models were analysed and further developed in order to better reflect different service categories

and customer expectations.

In addition, the Group management team continued the systematic steering of performance in sales,

purchasing, repair and maintenance, depot performance and modular space operations. As part of

the Cramo Performance Management model, the business processes of modular space were as-

sessed in order to reinforce the competitiveness in modular space. Processes to win and deliver

large and complex customer projects were also assessed.

In order to ensure the effective steering of its business operations, Cramo continued to develop the

Group’s control and reporting platform as well as the launch of the One Cramo Enterprise Rental

application.

Internal control and risk management development activities related to financial reporting in 2015

In 2015, there was an emphasis on forecasting business performance in all markets. Special atten-

tion was paid to performance management related reporting including pricing and cost control. With

regard to cost control, the focus was in improving the direct cost ratio. Group financial management

focused also on cash collection, fleet investment management and tax issues.

13

In order to continuously develop control maturity, the Group Internal Audit function continued to audit

the Group’s key operative processes at Group level and in selected OpCos. In addition, OpCo follow-

up reviews were conducted when required. Depot-level internal audits were continued as an ongoing

control activity.

Priority areas in 2016

Cramo’s controlling and steering model is aimed at adding value to the business. This is achieved

through forward-looking analysis, simplification, prioritisation and participation.

The Group Finance and Development function will further develop analysis methods and tools for

assessing customer, product and project profitability. In addition, the Group’s pricing models and

methods will be reassessed. The impact of new and amended IFRS standards on financial reporting

and business model will be evaluated. These include, among others, revenue recognition and leas-

ing standards.

In 2016, the development of internal control will include the monitoring of control activities in selected

OpCos and Group functions. The selection of OpCos for review will be risk-based, and the review

will be performed by Group financial management, Region Business controllers and the Group In-

ternal Audit function. Improvement measures will be identified and implemented in order to further

advance control maturity. The depot audit programme will continue as a regular control activity.

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