The aim of the CapMan’s risk management is to ensure that the risks associated with the company’s business and objectives are identified and evaluated, and that the company reacts appropriately to these risks.
The Board is ultimately responsible for the proper organisation of risk management and internal control. The Management is responsible for implementing risk management. The Group’s CFO coordinates the risk management program and is responsible for drafting and updating an internal control program. The CFO reports to the Board on matters concerning risk management and internal control. More information on the organisation of risk management, risk categories, and the organisation of internal control and audit is presented below.
More information on risks relevant to CapMan’s business can be found in the Annual Report, in particular in the Board of Director's Report, in the Corporate Governance statement and in the annual accounts (especially the note 33). The corporate governance statement also includes information on internal control and risk management pertaining to the financial reporting.
Organisation of risk management
The Management Group defines the main risks associated with business areas and other functions. The company has an action plan for the most relevant identified risks.
CapMan has Investment Committees, one for each fund. Investment Committees make investment proposals to funds’ decision making bodies and are not involved in managing the company’s operational activities. Investment proposals are always made on the basis of a consensus of opinion among the members of the Investment Committee. Investment Committees generally comprise Senior Partners and other members nominated by the CEO. The Chairman is a person nominated by the Group’s CEO.
The monitoring team is part of the back office team and is independent of investment teams. The monitoring team is responsible for the funds’ quarterly valuation process, monitoring and forecasting the success of the Group’s funds, and preparing the models for and calculating carried interest income.
The Valuation Committee gives a recommendation on the valuations of the underlying investments to each of the funds managed by the CapMan Group. The Valuation Committee comprises of the Group’s CFO and either the risk manager of the relevant fund or the Head of the relevant investment team. Portfolio companies are valued four times a year in conjunction with CapMan’s interim financial reporting. The investment professionals responsible for portfolio companies make proposals on the valuations of investment targets and compile background material to support their proposals. The monitoring team checks the validity of the principles applied in these proposals. The task of the Valuation Committee is to process valuations and ensure that the same valuation principles are consistently used for all portfolio companies and that the principles comply with International Private Equity and Venture Capital Valuation guidelines (IPEVG). The final valuation decisions are taken by the Boards of the funds’ general partners or management companies.
Audits of investment processes
Audits of investment processes are conducted on a regular basis to ensure that investments are made in compliance with defined procedures. The legal team is responsible for compliance audits, and its members are independent of investment teams.
Organisation of internal control and audit
The Group’s CFO is responsible for drafting and updating an internal control program and he/she reports to the Board on internal control matters. The internal control program also covers monitoring the legal compliance of funds and their activities, and its purpose is to ensure that:
- authorisations concerning payments by the Group and by funds are clearly defined
- authorisations concerning investment commitments made in the Group’s name are clearly defined, and that
- the Group and funds comply with the applicable regulations and contractual obligations.
The Group’s General Counsel is responsible for drafting and updating the fund compliance program. The aim of the program is to ensure that the activities of funds managed by the Group comply with contracts, agreements, and other commitments.
Taking into account the nature and extent of the company’s business CapMan has not considered it necessary to organise internal audit as a separate function. The internal audit of the licensed operation has been outsourced to an external service provider. CapMan has in recent years increased the number of personnel in compliance and risk management functions in order to ensure that the operations comply with laws and regulations and that the risks are identified, monitored and managed appropriately.