Property ownership and management exposes operations to a number of internal and external risks, or uncertainty factors that could impact the Group’s ability to achieve its overall objectives for growth. Castellum’s risks are divided into six overall categories: business environment, strategic risks, operational risks, sustainability, people and financing. Castellum therefore works continually, in a structured manner, to identify and actively monitor financial and other risks that operations encounter or are faced with. The Group’s risk management involves a structured process of decision-making with the aim of establishing a balance between the desire to limit uncertainty or risk and the task of generating growth and shareholder value.
Risks, exposure and risk management
Castellum defines risk as an uncertainty factor that may affect the company’s ability to achieve its objectives. Risk management aims at balancing the desire to limit risk and achieving objectives. In order to assess the effect of identified risks, an internal risk rating is conducted in which each risk is assessed, from the perspectives of impact and probability. For more information about the method see method for risk assessment and sensitivity analysis further down on this page. This process determines if the risk should be further monitored (Monitor), if actions should be taken (Focus) or if it can be handled through standard review and management (Review).
To facilitate risk management, Castellum has chosen to classify risks into the following categories:
• Business environment — risks due to the influence of external factors and events
• Strategic risks — risks associated with reputation or the ownership of Castellum’s property portfolio
• Operational risks — risks associated with the routine administration of Castellum’s property holdings
• Sustainability risks — risks associated with the environment, corporate responsibility and/or liability risks
• People — risks associated with our employees and the people in and around our properties
• Financial risk — risks in Castellum’s financing and reporting
Methods for risk assessment and sensitivity analysis
Castellum analysis risks on annual basis. Risks are evaluated on impact and probability and mapped in a matrix. Impact are measured on a scale of 1-5 (Serious, Major, Medium, Minor and Insignificant). Probability are measured on a scale of 1-5 (Certain, Likely, Possible, Low and Unusual).
Each risk is evaluated on 3 year and 10 year scale, before and after possible measures implemented by Castellum. The purpose with evaluating risks in different scenarios over time and before and after mitigating measures, is to be able to follow the development over time of the risk’s impact and possibility as well as to be able to change the company’s respond to the risks when necessary. In the Annual report we report the priority we have set on each risk (To monitor, To focus on, To review). We also report if the focus on the risk has changed since last year (Scale: Reduced focus on risk area, Unchanged focus on risk area, Increased focus on risk area.) This is a kind of sensitivity analyse that analysis how our mitigating activities will affect the possibility for the risk as well as the impact on the organization if it occurs.
As an example, Castellum has identified the following three risks as important long-term (3-5 years+) emerging risks that will impact our business in the future:
- Crisis: The risk of a major crisis occurring, are increasing in a world that is becoming more and more interconnected. These risks are for example errorist attacks, cyber attacks, pandemics, extreme weather events, environmental disasters and information leaks.
- Operational environmental risks: Environmental risks directly related to Castellum activities can include physical environments, which affect people and properties, as well as prevailing prices for natural resources, in terms of materials and energy.
- Climate change: Climate change implies a risk of property damage caused by weather conditions changing over time, higher water levels and changes in other physical environments that impact properties.
- Financing: Property ownership is a capital-intensive business that requires a well-functioning credit market. Access to financing is fundamental for Castellum and for continued growth. Insufficient liquidity reserves could result in Castellum missing out on business opportunities.