Risk and Risk Management

ike all companies and business operations, SkiStar is exposed to various risks related to the business. For SkiStar, it is important to identify the risks that may prevent the Company from achieving defined targets and to determine whether the risks are in line with risk propensity.

Where necessary, measures are taken to avoid, minimise or monitor identified risks. The purpose of risk management is to continuously assess and manage the risks that arise in the operations and to ensure that it forms the basis for successful sustainability work.

Operational risks

Seasonality

The majority of SkiStar’s revenues are generated in the period December to April. SkiStar’s operations are well adapted to seasonal variations, particularly in terms of the workforce. Most of the winter bookings are made before the season.

An increased proportion of advance sales means that business transactions can be completed at an earlier point, which in turn reduces the operational risk. Seasonal variations are also managed by investing in snowmaking systems to guarantee skiing early in the season.

Snow availability

The number of guests at SkiStar’s destinations is influenced by weather and snow conditions. A late winter with a lack of cold weather and natural snow in time for Christmas has an adverse impact on demand. Lower demand can also arise in winters with prolonged cold periods and good snow conditions in the southern, more densely populated parts of Scandinavia, as snow, cold weather and skiing opportunities are available closer to home. However, in a longer perspective, it is positive for the industry if skiing is available throughout Scandinavia, as many new skiers will be recruited. SkiStar addresses these risks through continuous development of snowmaking systems to guarantee skiing, and through early sales to ensure that most of the accommodation capacity is booked before the Christmas week when the high season starts. SkiStar’s operations are also dependent on there being no restrictions on travel within or between mainly the Scandinavian countries. The spread of the novel coronavirus in 2020 demonstrated that there are scenarios in which the Company cannot or should not keep its core operations up and running. Risk is managed through proactive dialogue with authorities, regional governments and local municipalities as well as continuing to work for financial stability.

Economic cycle

Changes in people’s disposable income are reflected in private consumption, which in turn has a bearing on whether they can take a winter holiday. SkiStar’s historical sales and earnings trend shows that the Company has been able to deal with fluctuations in the economy. A large proportion of SkiStar’s guests are families who tend to return year after year and who see a winter holiday as a high priority. Sensitivity to economic conditions in Sweden is reduced by the existence of operations in Norway and Austria.

Competition

Sun and beach holidays and weekend city breaks are considered SkiStar’s main competitors, but competition also comes from other sectors that compete for peoples’ disposable income, such as durable goods and home investments. Other competitors include other alpine ski resorts in Scandinavia and the Alps. The alpine ski industry has a high entry threshold, which limits competition.

Initiatives such as large investments in service-oriented employees, leadership, modern lifts and snowmaking systems, IT and restaurants ensure that SkiStar’s alpine destinations maintain a high level of quality. SkiStar’s destinations have good accessibility to populated areas due to their geographical proximity and affordable transport solutions in the form of trains, aeroplanes and coaches. SkiStar’s customers have easy access to the Company’s products and services via online marketing and sales systems that facilitate the booking process for them. Other important competitive factors include a strong financial position, known and attractive brands and a strong cash flow.

Expansion

SkiStar’s strategy for growth includes better utilisation of the existing destinations and development of the products and services offered. Growth is also created through the acquisition or leasing of other ski resorts. All the companies acquired by SkiStar have performed well and made major contributions to the Company’s successful development.

Accommodation capacity and occupancy rate

The profitability of alpine destinations is dependent on the number of available beds and the occupancy rate. For SkiStar, it is important to have control over a large accommodation capacity to optimise the occupancy rate by monitoring changes in demand and pricing accommodation correctly at all stages of the season. SkiStar works actively to increase the number of beds at the destinations and to increase the proportion mediated by the Company itself. It is also important for older cabins and apartments to be modernised to maintain high demand. In addition to SkiStar’s own investments, new investments in cabins and apartments are mainly conducted by external parties or jointly owned companies. The attractiveness of SkiStar’s destinations draws investment capital, which generates long-term growth in the number of beds and the development of different types of accommodation.

Employees

Payroll expenses are the Company’s largest individual cost item. SkiStar’s continuing success is dependent on motivated and committed employees. SkiStar works on leadership issues and training to increase the efficiency, awareness and commitment of its employees. The level of service that guests receive from our staff plays an important role in their overall experience. So, there is a risk that it will be harder to recruit qualified seasonal employees when the economy is strong and unemployment is low.

SkiStar’s Group management at the end of the financial year consisted of the CEO, CFO, Marketing and Sales Director, CTO, Legal Counsel/Head of IR, two Norwegian Resort Managers and three Swedish Resort Managers. These individuals owned a total of 131,952 Class B shares in the Company as at 31 August 2020.

To retain key personnel, SkiStar offers leadership development, succession planning, training and incentive programmes.

Safety and security

SkiStar works actively on safety by means of trade union cooperation, regular training, incident reporting and a systematic health and safety programme. Continuous risk analyses are conducted at all destinations to minimise the various types of risks and have the correct insurance cover in place. SkiStar also has an extensive crisis plan to ensure that the Company is well prepared in the event of any accidents or incidents.

Sustainability risks

Sustainability is included as an evaluation factor in SkiStar’s business development and decisions. Management of sustainability risks is an integral part of the Group’s operations. All identified sustainability risks are managed in the Company’s risk management process and play a fundamental part in investments and decisions. A description of SkiStar’s work on sustainability and tackling of risks can be found in the sustainability section.

Dependence on climate and weather

SkiStar’s operations are dependent upon cold winters with sub-zero temperatures. Climate change in the form of warmer temperatures and changing weather conditions and precipitation can affect the business and increase the risks of a shorter season, also affecting the number of skier days. To address the risks associated with climate change, the Company works on long-term objectives aimed at minimising the Company’s impact on nature and the climate. This is done partly through technical solutions to ensure favourable conditions at SkiStar’s destinations, and partly by working towards defined climate and emission targets to reduce emissions and deterioration of the natural environment where SkiStar operates.

SkiStar may, to some extent, be directly and adversely affected during winters when skiing is available in the southern densely populated parts of Scandinavia, as skiing can be offered closer to home. However, in the long term, this is positive for the industry, as new skiers are recruited. 

Corruption

Corruption is difficult to detect and SkiStar’s focus is therefore on minimising the risks of corruption. During training and induction programmes, SkiStar’s employees gain knowledge about how the Company’s policies and other governing documents are structured and how employees are expected to act in the event of suspected corruption. A whistleblower service is available internally to enable anonymous reporting of violations.

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