Special risks

Business-related risks
Like all other IT companies, KMD is exposed to a number of business-related risks in relation to the development of the market, customer demand, technological change, employee recruitment, project management, etc. However, the following are regarded as special risks in relation to KMD.

Centralisation of local government task performance
Given that a large proportion of KMD's business is connected with sales to local governments, a transfer of tasks to central government would entail a risk to KMD's business. However, the management regards the risk in the short and medium terms as limited.

The transitional agreement
In connection with the sale of KMD, a transitional agreement was signed concerning the regulation of future price developments and the service level for certain IT systems that are critical to the local governments’ administration of legislation in a number of vital welfare areas. The purpose of the agreement is to ensure that the local governments experience continuity in KMD's development of these critical systems irrespective of a change in ownership. The agreement is thus designed to ensure that, as a minimum, KMD continues its provision of these systems according to an “as-is principle”, but does not include obligations for the local governments to purchase KMD’s services in future.

The management assesses that in the short and medium terms the agreement will not have a negative influence on KMD's possibilities of implementing its current strategy.

Development and implementation of the Opus project
As well as providing KMD with major business opportunities, the Opus project also represents the largest single operational risk for KMD.

The development of the Opus administrative suite (financing, payroll, procurement, etc.) is of major importance and is expected to be completed during this strategy period.

The initial development has taken more time and resources than first expected, but the management is convinced that the current development is realistic. The management assesses that sufficient resources have been allocated to the project and that the project has the necessary project management and top management attention to result in a successful development.

Financial risks
KMD is not particularly exposed to financial risks. The present financial crisis is of minor significance for KMD because the major part of our revenue derives from the local government market. KMD is not therefore susceptible to cyclical impacts. And consequently the company is not, as is generally seen in the IT industry, being directly affected by the current economic situation.

KMD only trades minimally in foreign currencies, mostly the euro. In 2009 KMD refinanced its short-term bank debt and converted a proportion of the debt into long-term loans. 97% of KMD's outstanding balances are settled within 60 days, which means that the credit risk is minimal.

The financial risk therefore relates primarily to changes in interest rates. The Group follows a board-approved finance policy with a low risk profile so that interest rate and credit risks only arise from commercial matters.

The management continuously assesses whether KMD has an adequate capital structure.

Security risks
KMD manages huge amounts of both administrative and personal data on behalf of our customers, and on that basis security has always been high on KMD’s agenda. In order to focus more keenly on this area, we ended the year with an internal campaign to ensure increased awareness among our employees of the security aspects of our daily work.