Risk management

Risk management

Risks and risk takings are a natural part of our business operations. A good understanding of the risks together with an efficient way of identifying, evaluating and managing the risks are important for our short- term and long-term success. Properly handled risks can add value and business benefits.

Bilia has a yearly formal process on Group level to identify, plan and reduce identified risks in the business. Some of the identified risks Bilia can influence while others are beyond the Group’s control. The following pages include a description of the risks that have been identified within the framework of Bilia’s risk management process together with a short description of the opportunities associated with the risk area and the measures taken to manage these risks.

Market risks

RISK DESCRIPTION
Demand for Bilia’s products and services are influenced by fluctuations in the business cycle. The Car Business is the part of the operations that are influenced most by changes in the business cycle. In a recession, some customers choose to postpone or cancel their car purchase. Events, such as natural disasters and pandemics, can have significant consequences for car manufacturers’ production and thus Bilia’s access to products. Reduced demand for cars may also affect the value of cars in stock and cars sold with guaranteed residual values.


OPPORTUNITIES AND MANAGEMENT
The Service and Fuel Businesses are less impacted by changes in the business cycle since cars require service, repairs and fuel regardless of the state of the economy. Sales of used cars are less affected by changes in the business cycle as customers choose an used car over a new car in these situations. However, a deep recession could also affects the Service Business and sales of used cars. Bilia continuously work close to the general agents to understand the market development in order to identify activities to secure sustainable sales and profitability.

Risks related to authorization Agreements

RISK DESCRIPTION
A car manufacturer and/or general agent can unilaterally recall a sales authorisation and terminate the sales agreements with Bilia. Further, a car manufacturer and/or general agent can become insolvent with disturbance in deliveries and uncertainties in the market as a result. Volvo, BMW and Toyota are the largest car manufacturers/general agents for Bilia why a recall or termination of authorisation agreements, a changed content and/ or balance between the manufacturer/general agent and Bilia could have significant negative impact on Bilia’s operations.

OPPORTUNITIES AND MANAGEMENT
Good relations with car manufacturers/general agents gives opportunities for continued expansion and reduce the risk for recall of sales authorisation for new car sales. Bilia is not dependent on one single manufacturer/general agent but instead has several collaboration partners, which reduce the risk compared to being dependent on one single manufacturer/general agent. Sales of used cars and the Service Business are not subject to the approval from the general agents for establishment and expansion of business. Bilia continuously work on strengthen and developing its customer relationship to maintain a strong position on the market.

Risks related to authority decisions and opinion position

RISK DESCRIPTION
Regulatory decisions that lead to changes in taxes, charges, subsidies and restrictions on the products Bilia sells can influence both demand for and the valuation of cars in stock and cars sold with guaranteed residual values. Bilia’s operations can be effected by the general opinion and authority decisions mostly regarding queries on the car’s part in the society in relation to climate and environmental issues.

OPPORTUNITIES AND MANAGEMENT
New regulatory decisions and changes in opinion can result in an improved or lower demand for Bilia's products and services. Adapting the operations to changes in laws and regulations is an ongoing process and are achieved by monitoring relevant regulatory changes. Adjustments to products and services are made ongoing on the basis of changes in opinion.

Risks for alternative sales channels

RISK DESCRIPTION
One car manufacturer/ general agent has established an own digital sales channel and announced a future target for direct sales of cars to customers. If the car manufacturers/general agents, which Bilia is collaborating with, should move, fully or partly, into own sales channels then Bilia's operations could be impacted negatively.

OPPORTUNITIES AND MANAGEMENT
Bilia mainly operates through its own facilities, which is visited by the customers in connection with sale of cars and services. Bilia also has digital sales channels for used cars and accessories. These digital sales channels does not comprise a significant part of Bilia's net sales. Bilia follows the development of alternative sales channels closely and will in the future make whatever adjustments assessed required.

Risks related to competitiveness and technological development of the products

RISK DESCRIPTION
Bilia is dependent on the ability of the Group’s business partners to develop competitive products that incorporate the technological advances. One example is development of car models in line with the ongoing discussion about sustainable fuel alternatives. Future technological development of the products can influence Bilia’s Service Business for example in relation to the complexity of the products and/or motor technique.

OPPORTUNITIES AND MANAGEMENT
Bilia's business partners are financially well established businesses with resources to long -term assure the competitiveness and technological development of the products. Our business partners currently offer environmental friendly cars, which match the current tax systems from the governments, and new launches are planned.

Risks related to development of own concepts and services

RISK DESCRIPTION
To maintain and strengthen its competitiveness, Bilia must develop concepts and services that appeal to the customers. Bilia’s ability to develop new concepts and services also helps to strengthen the suppliers’ brands and create customer loyalty.

OPPORTUNITIES AND MANAGEMENT
Bilia continuously develops products and services based on the customers need and requests. One example of concepts and services is wheel storage subscriptions. This development work requires resources. Bilia is confident that the Group has the resources required to remain in the forefront of service development.

Risks related to key persons and coworkers 

RISK DESCRIPTION 
There is a future risk that Bilia will not be successful in recruiting or keeping the competent people to the extent that is requestedPeople with a vehicle technical competence is a scarce resource, which may influence future growth within the Service Business negatively. 

OPPORTUNITIES AND MANAGEMENT 
Bilia has good results in the annual employee survey compared to other companies. Bilia focus on keeping and further improve the environment for our key persons and coworkers to be an attractive employer. Bilia works actively together with the schools to contribute to make the vehicle technician profession more attractive and to contribute to a good quality on the education that is offered. 

Risks related to facilities and environment

RISK DESCRIPTION
Bilia leases most of the facilities for the operations. As a tenant, Bilia may become dismissed from the leased at the end of the rental period, which would mean that Bilia would lose strategic business locations. If contamination should be confirmed at any of Bilia’s facilities, there is a risk that Bilia may be held responsible for decontamination of the facility. Such decontamination may be associated with considerable costs.

OPPORTUNITIES AND MANAGEMENT
To lease facilities give Bilia flexibility to adjust the number of facilities and the location of the facilities to be favourable for the operations. Bilia works, as an integrated part of its operations, to minimise the negative effect on the environment. 75 per cent of the facilities in Sweden and Norway are certified according to ISO 14001. These certifications means clear processes to discover and act on any deviations.

Risks related to Acquisitions

RISK DESCRIPTION
As part of realising BIlia's strategic growth target, businesses are acquired. If the status of the acquired operations were to differ significantly from what was known before the acquisition, or if the integration of the operations would fail, it could influence Bilia negatively.

OPPORTUNITIES AND MANAGEMENT
Through acquisitions, Bilia improves its operations from a strategic and financial perspective. New operations are continuously integrated and follow-up versus expected performance is made during the integration period to early identify and act on any deviations.

IT related risks

RISK DESCRIPTION
Bilia's operations are dependent on a well working IT-environment. A centralised and coordinated IT-environment gives the Group advantages but at the same time mean higher sensitivity for disturbances such as for example downtime of significant operational systems. Further, there is a risk for external attacks on the IT-environment through viruses or hacking, alternatively trespassing and information theft.

OPPORTUNITIES AND MANAGEMENT
A centralised and coordinated IT-environment gives the Group advantages such as lower costs and centralised competence, which favors the development work within the IT-area. Actions have been taken to minimise effects of downtime and external attacks on the IT-environment. Bilia works continuously to update the processes to manage external attacks on the IT environment and analyses existing and new risks and threats.

Risks related to non-compliance of laws and rules

RISK DESCRIPTION
A number of laws and rules regulates Bilia's operation. Bilia's ability to comply with laws and rules and deliver high quality in all customer relations is crucial for the customer confidence. An inability to comply with laws and rules and deliver high quality to customers may result in legal or regulatory penalties, financial losses and a negative impact on the customer confidence in the Bilia brand.

OPPORTUNITIES AND MANAGEMENT
To comply with laws and rules and to minimise the risk exposure Bilia has developed a framework, which includes the Bilia Code of Conduct, Competition code, group policies and steering documents. For certain areas such as competition and integration there are special compliance programs with training for the Group's coworkers.

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