Risks and risk management

Together with external experts in IT security Peab’s IT function works systematically to map out IT risks based on accumulated information and routine follow-ups according to a audit plan and continuity planning. Focus is on preventative actions to ensure access to information and IT tools from internal and external sources. External monitoring is continually analyzed in order to meet new threats and requirements.

Peab is working to increase our employees’ awareness and knowledge concerning information security risks.

Peab’s business is largely contract and project related. Erroneous calculations can lead to incorrect tenders and losses in projects. There are a number of contract types and the risk level varies accordingly. Grey areas in the terms can lead to disputes with customers about where responsibility lies and thereby make it hard to assess the result of projects.

Price risks can be unforeseen cost increases for materials or subcontractors. Other risks can be shortcomings in the use of technical solutions and wrong product choices.

Structured risk assessment is crucial to ensure that risks are identified and correctly priced in bids that are tendered and in the underlying calculations. The right resources in projects ensure that they will be carried out according to stipulated procedures, and with the right products and methods.

Several years ago Peab established a Procurement Council in order to produce thoroughly processed calculations and tenders for projects over a certain size. The Council can also be consulted for smaller projects where needed.

Price risks are managed through purchasing processes with the right suppliers, largely procured through central contracts.

Flaws in the supply chain or how the SCs are handled are one of Peab’s greatest risks and can affect our profitability and brand. Choosing the wrong supplier/SC can lead to quality defects, delivery delays or no deliveries at all. Suppliers/SCs who do not conform to existing laws, conventions and Peab’s contracts and regulations can have a negative effect on the environment, human rights, equal opportunity and the work environment. There are also risks connected to dependence on one or a few suppliers. Purchases outside of Peab’s framework contracts can entail risk.

Failure to ensure that information about Peab’s regulations is received by every individual at a Peab workplace can also entail a risk. Insufficient monitoring of suppliers or shortcomings in audits and analyses before a contract is signed are other risk factors.

The Code of Conduct and the ethics clause for suppliers are attached to all contracts Peab signs with suppliers/SCs. Peab has developed procedures in the work environment, work conditions, reliable supplier chains and the environment. These include using a blocking system that makes it possible to stop rogue suppliers and SCs, and in Sweden Peab has initiated third party checks of workplaces. Peab also works with audits of certain suppliers.

One example of dependence on a supplier is the raw material bitumen, where future deliveries to Peab have been in question. To ensure deliveries of bitumen Peab has, among other things, complemented with other suppliers and drawn up strategic supply plans.

Peab works strategically with short and long term skills recruitment and our attraction as an employer through practical measures like establishing new supply channels in cooperation with the education system, active integration work, extensive internal training and running our own high school, the Peab School. We believe being a social actor and displaying our important role as a community builder is crucial to attracting the right skills.

We have launched a new recruitment system and career map aimed at clarifying development paths for our employees. Employees’ skills development is planned and documented with the aid of a competence platform. Peab’s goal-oriented work with diversity and equal opportunity is also important.

To prevent incidents and accidents at workplaces Peab continuously develops quality-ensured work methods and trains personnel. Focus is on planning and risk assessment early on as well as monitoring and learning from reported risk observations, incidents and accidents. Efforts to increase the number of risk observations have been very effective and observations have redoubled. This generates important organizational learning about where, when and why risks occur.

Peab teaches employees about equal treatment to prevent discrimination and victimization and to promote equal opportunity.

Peab’s broad geographic presence and our mix of operations and products has a dampening effect on declining economies and markets. This was evident in our most recent acquisition in paving and mineral aggregates that contributes to spreading risks from both perspectives. In general, we work continually to augment flexibility in our overhead to better handle external and market risks.

In business area Project Development, for example, we reduce sales risks through set requirements for advance sales before production starts in housing projects. The requirement for a certain level of rented space before production start is the corresponding risk management for commercial property developments.

Peab’s broad geographic presence and our mix of operations and products has a dampening effect on declining economies and markets.

Peab also continues to develop our dialogue with customers, we work with so-called market navigators that map ongoing projects in sub-markets and make continuous checks on our customers’ ability to pay.

Political decisions and currents influence Peab’s business. This is true for politics in the Nordic region as well as international politics, among them those generated in the great powers such as the USA.

Public investments in community building have direct consequences for Peab’s business.

For example, laws and regulations concerning buying homes, like requiring a capital investment from private persons, affect Peab’s project development operations. There are also zoning risks in development operations for exploitation land where decisions by authorities can impact land values and thereby the project’s future profitability.

Peab’s broad geographic presence and our mix of operations and products contributes to dampening political risks as well.

Project development operations, for example, work with short lead times from land acquisition to finished project in view of the risk for changed market prerequisites.

Peab is exposed to environmental and climate related risks, which can damage people and our business. A lack of competence and adjusting too slowly can lead to Peab’s products and services not meeting the demands and expectations of customers. 

Based on known climate scenarios global warming will likely create physical risks such as extreme weather, floods and material and energy shortages, which can affect ongoing projects and our own property and facilities. Climate change also leads to transition risks such as shifts in demand, higher raw material prices and new laws.

Other identified risks are, for example, suppliers/SCs that do not hold a sufficiently high environmental standard, the use of prohibited or unsuitable material and products as well as the improper use of material. This can be hazardous to people’s health and the environment as well as give rise to compensation demands and damage Peab’s brand.

Risk prevention comes under the Group’s three prioritized environmental areas; climate neutrality, resource efficiency and phasing out environmentally and health hazardous products. We have also begun climate analyses according to TCFD. For more information see the section Environment

Our environmental work starts locally and is run systematically based on a business management system that is for the most part environmentally certified. These procedures comprise, for example, how monitoring laws and compliance is conducted but also enable practical support of environmental steering in a project and regulate environmental delegation in order to ensure responsibility.

Employees continuously receive education and training to ensure the right environmental competence. Preventively we perform operation specific in-depth analyses. We have also taken measures to adjust operations to climate changes, for example by developing new products with a lower climate footprint.

Peab conducts systematic ethical work focused on preventive education and strict consequences for transgressions. Supplier checks and audits prevent risks in the supply chain.

A whistleblower system ensures the right to anonymously point out ethical risks, internally and externally. Peab’s Ethical Council ensures that infractions of the Code of Conduct and laws, as well as matters concerning discrimination and victimization are investigated and dealt with consistently and impartially.

Since Peab applies recognition over time as a project is completed for most of our ongoing projects, erroneous project forecasts can entail that recognition and monitoring can be misleading.

A number of balance items, including project and development property, are valued based on estimations and assessments. This value can be affected by, for example, the current market, interest rates and customers’ preferences, which can lead to impairment.

A prerequisite for correct recognition over time is reliably forecasting the outcome. Well-developed procedures and system support for monitoring and forecasting each project is crucial to limiting the risk of erroneous revenue recognition.

The recognized value of project and development property has been calculated as the lowest of the purchase price and the net sales price based on current price levels in the respective locations. Peab is continuously testing the values of project and development property through an internal model. As a complement to this valuation external market values are annually reviewed for some of the properties.