Confidentiality is essential in venture capital and private equity
Finnish Industry Investment Ltd’s operations are regulated by legislation (Finnish), and the company must be economically viable over the long-term. The company’s activities and operations are guided by:
- An annually adopted investment plan
- risk management policy
- impartiality Instruction,
- insider Instruction,
- instruction for Notification of a Concentration and
- responsible investment principles.
Corporate governance is a top priority in FII's internal activities. FII follows the Finnish Venture Capital Association's Code of Conduct and its guidelines for transparency and openness. FII also complies with well-documented internal instructions.
The framework for FII's investment policy is specified in a special law governing the company and in a government resolution setting out the main policy points for the company's investment operations. The company's Board of Directors decides an action plan each year defining the investment plan for specific allocations in the following year.
Investment operations focus on growth-stage investments, which currently account for some 70% of the investment portfolio. Investments are also made in earlier and later stages. The main focus of investments is on companies operating in Finland. The guiding principle is that investments by FII must directly or indirectly benefit the Finnish economy. FII's portfolio can be found on the company website.
At the end of 2013 the Finnish government submitted to parliament a Government Bill for amending the Act on State-Owned Company Suomen Teollisuussijoitus Oy. The amended Act entered into force on 15 January 2014. The amendment broadens the scope of FII’s operations by allowing the company to implement and manage investments and share acquisitions to be made in pursuance of Finland’s industrial policy. FII will continue its venture capital and private equity operations as before.
To enhance the reliability of operation and risk management, internal operations are formed into processes, for which the actions, responsibilities and controls are defined and described. The most important functional process is the investment process.
The investment teams have the main responsibility for preparing and monitoring investments. The Management Team evaluates investment proposals, after which the Board of Directors decides on the investments. The Management Team decides on implementing an investment and also on exiting from investments. Investment teams manage and the back office, which is independent of investment operations, monitors all the investments in the portfolio. The investment process comprises a number of documented controls, for which the back office is responsible. Regular reports about the development of investments and risks associated with them are submitted to the company's Board of Directors.
FII's investment process:
- Generation of deal flow (investment teams)
- Preparation of investment (investment teams)
- Investment proposal to management team (investment team, management team)
- Investment decision to Board of Directors (board of Directors)
- Implementation of investment (investment team, management team, back office)
- Monitoring and management of investment (investment team, management team, back office)
- Exit from investment (investment team, management team, back office)
Risk management policy
Risk management policy aims to ensure that risk management has a harmonized operating model within the company and that FII's management and Board of Directors have sufficient information about risks to support their decision-making. The policy aims to promote the identification and evaluation of risks, risk awareness and the understanding of risks.
- Impartiality Instruction: In line with good corporate governance, the company's operations must be transparent, in order to preserve their credibility, and managed so that external players retain their trust in the company's operations. These aspects are particularly important in a government-owned company. Therefore, FII has a standing Impartiality Instruction containing guidelines for the impartial and ethical behaviour of its personnel and Board of Directors. In compliance with good corporate governance, any persons handling a matter must be impartial in all aspects of the matters they handle.
- Insider Instruction: Aimed at enhancing public trust in investment, the instruction is based on Finland’s Securities Markets Act and on the instructions and regulations supplementing it. Proper instructions also increase the knowledge of company personnel and other persons working within the company’s sphere of interest, so that regulations are not unwittingly contravened. The Insider Instruction applies to all people employed by FII. Although FII is not itself a listed company, it often handles information classified as insider knowledge. Therefore, it is important to define procedures ensuring that people working in the company are aware of their insider status, and that they know how to manage insider information and the trading limitations for those with insider information.
- Instruction for Notification of a Concentration: FII's private equity and venture capital investments can make it necessary to file notification of a concentration and to obtain the permission of the Finnish Competition Authority. Instructions issued to personnel describe operating models for ensuring that the duty to notify authorities and to obtain permissions in merger and acquisition cases is properly handled.
The bulk of FII's procurement consists of purchases of consultancy services. In order to efficiently implement investment operations, for instance, the company purchases due diligence services, legal services and sector expertise such as consultancy services relating to mining finance.
Sizeable investments and large service procurements are planned in advance, wherever possible, when preparing the budget and business plan for the following year. The company's Board of Directors decides each year on the budget and business plan. The operative management decides on the implementation of procurements included in the budget. The President & CEO can decide on individual ex-budget procurements. Procurements are reported to the Board of Directors as a part of normal financial reporting. Large procurements are opened to competitive bidding, in which case a number of people prepare the invitation to tender.
Environmental responsibility - Green Office
FII has participated in the WWF Green Office programme since 2010 and was subsequently granted a Green Office diploma in 2012. The Green Office programme aims to reduce the ecological footprint of an office and its emissions of greenhouse gases.
The Green Office initiative aims for continuous improvement of the company’s environmental management system and heightened personnel awareness of environmental aspects. FII aims to promote sustainable development in its operations. Towards this end, the company monitors the eco-friendliness of its activities and procedures by, inter alia, measuring customary consumption, work-related travel, and its consumption of both paper and electricity.
FII reports indicator data to WWF each year.