Annual report 2012

Key risks within the Telekom Slovenije Group and activities in 2012

The most significant risks continue to be:

  • market and regulatory risks (risks from the external environment), and
  • the inappropriate planning and implementation of projects, the risk of inappropriate consolidation processes, the risk of poor management of strategic investments abroad and employee-related risks (internal risks).

Risk inventory and assessment are carried out at the Group level in accordance with the adopted methodology. Through support in the identification and management of potential risks, the Group enhanced the development of a culture of responsible risk assumption. To that end, the Group organised numerous workshops, at which proposals of key risk indicators were drafted with the aim of upgrading the risk analysis process.

Market risks, the impact of the economic crisis and the competitive environment 

The economic crisis is still reflected strongly in all segments. Users continue to be highly price-sensitive, which drives down the profitability of services. The sharp fall in the prices of services in the past is reflected in many operators who are financially strapped and recording losses. This increases the risk of default by other operators.  

Competition on the electronic communications market remains extremely stiff, giving users a large selection of offers from numerous operators. Thus, the risk the Telekom Slovenije Group faces from adapting too slowly to new business models and changing demand remains high. In order to mitigate that risk, the Group has introduced new measures, including an aggressive market approach and a new range of services.

The risk of playing a passive role in the formulation of user expectations persists. The expectations, habits and needs of users are changing with increasingly rapid technological development. Global technology companies dictate that development and influence the expectations of users. The Group therefore clearly presents its advantages, particularly the value represented by its network and other sources of added value. The Group creates a range of products and services that is in step with time and is distinguished from the competition.

Regulatory risks

The risk of over-regulation in Slovenia is constantly present, although active efforts are made to mitigate it. The regulatory body imposed the majority of measures with the aim of increasing competitiveness and establishing alternative operators on the market, which drives down market shares in individual segments of services. Additional regulation would increase the risk of a further decline in market share.

To mitigate regulatory risks in Slovenia, the Group actively participates in market analysis processes prior to the imposition of measures by the Competition Protection Office (CPO) and APEK with the aim of helping shape regulatory changes.

With the drafting of an electronic communications act and changes to legislation, the situation in this area is improving in Kosovo and Macedonia.

Risks related to the planning and execution of projects and the consolidation of processes 

The re-engineering of business processes within the Telekom Slovenije Group, in accordance with the development strategy until 2016, is bringing extensive changes in processes and the organisational structure, which in turn results in the risks of bottlenecks or the slowed functioning of business processes. There is also the risk that insufficient attention is given to current sales activity and that customer service is neglected. To mitigate these risks, processes are catalogued, administrators defined and optimisation activities implemented.

The optimisation of costs is an important strategic objective, while the implementation of such a strategy could run counter to the Group’s efforts to increase, or at least maintain, the number of users in certain segments. The Group therefore enhances user satisfaction and thus mitigates the aforementioned risks through the introduction of new services with an emphasis on increased mobility, investments in technologically advanced networks and effective user support. 

Risk of poor management of strategic investments abroad 

The Group is introducing a revised system of corporate governance to mitigate the risk of the ineffective operations of companies abroad. The Group is already exploiting synergies through coordinated corporate governance via strategic bodies and participation in the management bodies of subsidiaries, and with support in the establishment and transfer of technological solutions. A significant milestone in that direction is the establishment of a new pre-paid system and other solutions at One.

Employee-related risks  

Employee-related risks are primarily linked to achieving the internal restructuring plan and insufficient employee potential. The Group therefore provides for the constant training, education and development of key and perspective staff and the inclusion of employees who demonstrate potential in projects, with the aim of expanding their knowledge and gaining experience.

The risks related to the implementation of change management and those arising from diminishing employee loyalty and commitment, in part due to the merging of various cultures, are managed through active and transparent communication at all levels of management, in particular with regard to all changes and measures.