Governance and risk management

Corporate governance

RAI HOLDING BV
RAI Holding BV is a private company in accordance with Dutch law.

FOUNDATIONS
Our governance is based on Book 2 of the Dutch Civil Code (BW), the statues, various internal regulations and the corporate governance code 2016.

STRUCTURE
The governance structure of RAI Holding BV includes a general meeting, a Supervisory Board, an Executive Board and a Works Council (OR).

Legal structure

RAI Holding BV is a holding. The financial statement indicates the companies it comprises. Wherever this annual report mentions ‘RAI Amsterdam’, this should be understood to refer to RAI Holding BV and all its group companies. Group companies are participating interests in which RAI Holding BV plays a policy-deciding role.

RAI Holding BV and its group companies

Statutes

The most recent statutes of RAI Holding BV are dated 18 July 2008. The latest statutes of the subsidiary RAI Amsterdam BV are dated 2 June 2015.

Corporate Governance Code

The Executive Board and Supervisory Board of RAI Amsterdam recognise the Dutch Corporate Governance Code 2016. They apply the principles and best practice definitions therein insofar as they can be said to apply to RAI Holding BV.

code fully recognised

In some cases, the principles and best-practice definitions do not apply because RAI Holding BV is not quoted on the stock exchange and only has two shareholders. The following recommendations from the code are not applied or not fully applied:

  • provision 2.8.3 (publication of standpoint in takeover situations);
  • principle 4.2 (supplying information to the general meeting).

‘explain’

Governance of the Supervisory Board

The regulations of the Supervisory Board and its committees were reviewed in December 2017. The regulations refer to chapters, principles and provisions from the Corporate Governance Code 2016 in two ways. First, a large part of the code has become part of the regulations themselves, and, second, the regulations state that the Supervisory Board and Executive Board endorse the Corporate Governance Code. By making the chapters, principles and provisions part of the regulations, the code has effect in hindsight (with regard to accountability) and can be implemented by authorities as determined by the regulations. The Supervisory Board regulations are published on RAI Amsterdam’s website www.rai.nl.

Supervisory Board regulations in accordance with Dutch Corporate Governance Code

Task

The task of the Supervisory Board is to supervise the policy of the Executive Board and the general course of affairs within the RAI and its associated companies. In addition, the Supervisory Board acts as employer to the Executive Board and abides by the remuneration ratios and company culture. Finally, the Supervisory Board has an advisory role in which it assists the Executive Board. In fulfilling its duties, the Supervisory Board is focused on the interests of the RAI and its associated companies, and takes into account the interests of all those involved in the company. The Supervisory Board is responsible for the quality of its own activities.

supervising and realising employer and advisory role

Size and composition

The Supervisory Board should preferably have five members. Because the Municipality of Amsterdam as a shareholder has announced its intention to sell its interest, the position of Supervisory Board member with preferential right from this shareholder has been kept vacant, and the Supervisory Board performed its tasks with four members in 2018.

five members, two four-year terms at most

The profile is related to the composition of the Supervisory Board. It is discussed at the general meeting and with the works council whenever there are any changes. The profile is published on the RAI Amsterdam website www.rai.nl and as an annex to the Supervisory Board regulations.

profile determines composition

The Supervisory Board is composed in such a way that its members can function independently and critically with regard to other members, the Executive Board and any other partial interest, in accordance with the governance code. Each Supervisory Board member should be able to evaluate the outlines of the overall policy. Additionally, all members have a specific field of expertise and related competences required for fulfilling their duties. The Supervisory Board aims to be composed in such a way that continuity is guaranteed and membership well-balanced with regard to the age, experience and male/female ratio.

safeguarding independent and critical functioning

Committees

As the Supervisory Board in its complete configuration has more than four members, there are three core committees (in accordance with the regulations), namely an Audit Committee, a Remuneration Committee and a Selection and Appointment Committee. The committees are established and composed by the Supervisory Board. The full Supervisory Board remains responsible for all decisions, whether or not they were prepared by one of the committees. The regulations of the committees are published on the RAI Amsterdam website (www.rai.nl; annex to the Supervisory Board regulations). The participation of Supervisory Board members in the committees (compositions of the committees) is indicated in the Composition of Supervisory Board and Executive Board section above.

three committees

Step-down roster

Supervisory Board members are appointed for a period of four years, and can be reappointed for another period of four years. After eight years, Executive Board members can be reappointed two more times for terms of two years – however, the reasoning behind this must be explicitly explained in the Supervisory Board report.

The step-down roster is indicated below and is published on www.rai.nl.

Step-down roster

Maximum of 12 years (4+4+2+2)

Step-down roster
Name Date of first appointment Current term Upcoming proposal for stepping down or (re)appointment: first General Meeting after:
       
R.H (Roelf) de Boer 23.04.2015 1st 23.04.2019
W.C.M. (Mariƫlle) de Macker 17.03.2017 1st 17.03.2021
A.M.H. (Annemarie) Macnack - van Gaal 15.09.2015 1st 15.09.2019
J.W.Th. (John) van der Steen 07.04.2011 3th 07.04.2021

Training

After their appointment, every member of the Supervisory Board follows an introductory programme designed and financed by RAI Amsterdam. This focuses on general financial and legal affairs, financial reporting by the company, topics specific to RAI Amsterdam and its business activities, and the responsibilities of the Supervisory Board members.

determination of supplementary education

Once a year, the Supervisory Board also discusses any additional education that is desirable/required during the terms of the members.

determination of supplementary education

Shares, options, loans

No Supervisory Board member was provided with shares and/or options or similar rights for obtaining shares in the capital of the company. No personal loans or securities were provided to Supervisory Board members.

no personal loans and/or securities provided to Supervisory Board members

Remuneration policy and remuneration in 2018

The remuneration is described in the financial statement in the section ‘notes on consolidated annual account'. A remuneration report made available to shareholders describes the remuneration policy and accounts for its application in 2018.

included in financial statement and remuneration report

Governance of the Executive Board

The regulations for the Executive Board were last changed on 25 June 2014. They are based on Article 13, section 3 of the company statutes and serve as a supplement to the regulations and instructions that apply to the Executive Board in accordance with Dutch legislation and company statutes. The task of the Executive Board and its working methods are included in the regulations, which are published on the website of RAI Amsterdam (www.rai.nl).

Shares, options, loans

No Executive Board member received any shares and/or options or similar rights for obtaining shares in the capital of the company. No personal loans and/or securities were provided to Executive Board members.

no shares, options, loans or securities provided

Remuneration policy and remuneration in 2018

The remuneration of the Executive Board is also included in the financial statement in the section ‘notes on the consolidated annual account' as well as in the remuneration report.

Management structure

The RAI Amsterdam policy team consists of the statutory Executive Board, seven directors and three business support managers. The organigram below shows the policy team, with the Executive Board members and directors in red and business support managers in grey.

Employee governance

Code of conduct

RAI Amsterdam is aware of its social role and the resulting responsibilities towards all parties. Our actions and those of RAI employees are founded on the core values and business principles formulated by RAI Amsterdam. The code of conduct provides clarity by describing standards related to the actions and statements of everyone who represents RAI Amsterdam. The instructions given by the code of conduct are unconditional and not influenced by financial objectives. The code of conduct was implemented on 1 September 2006 and is published on the RAI Amsterdam website (www.rai.nl).

applicable standards

Whistleblower scheme

The whistleblower scheme determines how employees can report suspected violations to their employer. It details the procedure to be taken by the employer and determines that employees who report suspected violations in accordance with provisions and in good faith will not be put at any disadvantage in their position as a result of the report. The whistleblower scheme was implemented on 1 September 2006 and is published on the RAI Amsterdam website (www.rai.nl).

procedure for reporting suspected violations

Risk management

RISK ANALYSIS AND MANAGEMENT
RAI Amsterdam performs a risk analysis, defines mitigating measures and distinguishes between strategic, financial/administrative and operational risks at least once a year.

Risks

Strategic risks are related to events that can structurally undermine the position of the company.

We recognise 13 strategic risks:
S-1 exploitation risk: the loss of one of the RAI’s own major titles

S-2 market development: letting to third parties
S-3 traffic: the accessibility of RAI Amsterdam (city of Amsterdam, Schiphol)
S-4 exploitation risk: the risk that a major third-party event is cancelled
S-5 security: the risk of terrorism
S-6 market development: the risk that our own concepts become smaller due to online business models
S-7 [risk not made public for competition reasons]
S-8 loss of outbound sales agents
S-9 market development: limitation to growth of own events
S-10 market development: exhibitors use other channels to reach their target groups in the future
S-11 [risk not made public for competition reasons]
S-12 licence to operate: the RAI cannot structurally balance social costs and benefits
S-13 [risk not made public for competition reasons]

The first five strategic risks have not changed since 2016, while the second five were added in 2017 and the last three in 2018.

strategic risks

Financial/administrative risks are linked to developments in financial markets and financial & administrative management.

We recognise the following 11 financial/administrative risks:
F-1 financing risk (including being unable to comply with bank agreements)

F-2 interest risk
F-3 currency risk
F-4 debtor risk
F-5 administrative organisation: integrity, availability, monitoring of automatic data processing and storage
F-6 financial control
F-7 cash flow risk
F-8 potential excessive reimbursement of expenses (fiscal)
F-9 accounting fraud
F-10 risk related to activities abroad: different laws & regulations than in the Netherlands
F-11 tax plan for 2019

The first 10 financial/administrative risks are unchanged since 2016, while the last one was added in 2018.

financial/administrative risks

Operational risks are linked directly with operational activities.

Nineteen operational risks are monitored by the RAI:
O-1 safety while working in the halls
O-2 construction risks: risks not covered by licenses that can occur when placing temporary installations and structures
O-3 major health risks (legionella)
O-4 hazardous substances
O-5 hygiene and food
O-6 product liability related to RAI services
O-7 crowd control (e.g., in case of fire)
O-8 failure of installations essential to an event (cooling, heating, power etc.)
O-9 failure of in-house operational ICT systems (administration, operations)
O-10 failure of event network for exhibitors
O-11 growth in third-party demands on IT infrastructure and public services at RAI Amsterdam that is faster than our ability to upgrade/expand
O-12 use of public infrastructure by organisers, exhibitors and/or visitors that differs from expectations, resulting in major disruptions
O-13 privacy violations due to misuse of data
O-14 data theft by hackers
O-15 presence of asbestos in old building
O-16 developments in the market and demands from the organisation which outpace the IT infrastructure
O-17 lower profits from connectivity services
O-18 damage to reputation (going viral via social media)
O-19 inadequate ability to recruit sufficient numbers of quality personnel and flexible workers due to scarcity in the labour market

The risk ‘nationwide strike’ was removed and the risk O-19 added in 2018.

operational risks

Risk evaluation method

Evaluating the actual risks for RAI Amsterdam involves assessing both the current risk of an incident occurring and the current consequences (measured in financial terms) this might have on RAI Amsterdam.

current risk and consequences

The combination of the current risk and current consequences determines whether the current risk level is seen as low, medium or high. The evaluation explicitly takes into account the prevailing monitoring procedures and measures/actions taken to mitigate the relevant risk. The determination of risk and consequence is indicated in the matrix table. The letters in the matrix indicate the type of risk, with S representing strategic risks, O operational risks, and F financial/administrative risks. The associated numbers refer to the specific risks as described above. The colours represent the following risk levels: low (blue), medium (grey) and high (red).

evaluation of risk impact

Risk matrix

Likelihood and consequence determine level of risk

Risk matrix

Given the desired financial resilience, the RAI has set its maximum tolerance for financial risk at €10 million. If an impact of this magnitude should manifest itself, RAI Amsterdam will have sufficient buffers to manage the consequences.

risk tolerance

The risk management approach has stayed the same in 2018 as in 2017.

risk management system

At the end of 2018, RAI Amsterdam has made a start on further strengthening its risk and compliance management. The company wishes to set up a cyclical framework for this purpose based on the ISO 31000 and ISO 19600 principles and guidelines for risk and compliance management. This will enable the RAI to improve the quality of its processes and make them even more goal-oriented while being a learning organisation. A risk and compliance position has been created in order to shape this process.

strengthening risk and compliance management

The matrix shows that nine risks – seven strategic, one financial and one operational – are considered high. They are:
S-4 exploitation risk: the risk that a major third-party event is cancelled
S-5 security: the risk of terrorism
S-7 [risk not made public for competition reasons]
S-10 market development: exhibitors use other channels to reach their target groups in the future
S-11 [risk not made public for competition reasons]
S-12 licence to operate: the RAI cannot structurally balance social costs and benefits
S-13 [risk not made public for competition reasons]
F-11 tax plan for 2019
O-19 inadequate ability to recruit sufficient numbers of quality personnel and flexible workers due to scarcity in the labour market

Discussed with the Supervisory Board

The risks, internal risk management and control systems, along with the realised and planned actions, were discussed at the September meeting of the Supervisory Board.

Functioning of internal risk management and control systems

Below is an overview of the checks and actions undertaken related to the four risks with the largest potential impact on RAI Amsterdam.

S-4 exploitation risk: the risk that a major third-party event is cancelled
To prevent that a large exhibition or conference organised by a third party is cancelled (risk: very high, and in fact has occurred; consequences: severe) the relation management of the A accounts has been entrusted to the Executive Board. Where possible, long-term contracts are implemented. To minimise the consequences of the potential loss of a major third-party title on the results of RAI Amsterdam, priority in terms of both time and funds is given to attracting new exhibitions and conferences for the future.

limiting risks related to third party events

S-5 security: the risk of terrorism
RAI Amsterdam has a Safety & Security Board that monitors processes and, where necessary, adapts measures related to protection against calamities.

calamities

S-10 market development: exhibitors use other channels to reach their target groups in the future
This risk is being mitigated by intensifying innovation and product development. The RAI aims both to integrate new channels and connect them to exhibition titles, and to develop them autonomously so as to reach communities and inspire people.

S-12 licence to operate: the RAI cannot structurally balance social costs and benefits
This risk is being mitigated by focusing on the balancing of social costs and benefits by making it one of the two core principles in the new strategy covering the period until and including 2022.

F-11 tax plan for 2019
The RAI has an active lobbying policy and deploys mitigating measures where possible.

O-19 inadequate ability to recruit sufficient numbers of quality personnel and flexible workers due to scarcity in the labour market
Strategic personnel planning will provide more insight. The following measures are being assessed: policy development, new partnerships, department reinforcement and/or changes to how work is organised.

There is no risk linked to share prices as RAI Holding BV does not hold any shares listed on the stock exchange.

share price risk

Liquidity risk refers to the danger of having insufficient funds to cover direct obligations. Active monitoring of cash flow and setting up of a multi-year forecast which assesses the cash flow and predicts available liquidity limits the risk here. RAI Holding BV has formulated measures which will lead to an immediate lowering of expenditures should the liquidity risk increase.

liquidity risk

The current financing agreement will last until 2020. The uncertainty about the possibilities to attract financing is being mitigated through the maintaining of an active relationship with providers of loan capital, a proven track record of maintaining the agreed ratios, and keeping to a clear strategy. The current financing agreement, which runs up until and including 2020, will be followed up in good time before it expires.

uncertainty about the possibilities to attract financing

Risk linked to financial instruments is described in the financial statement in the section ‘notes on the consolidated annual account'.

financial instrument risk

RAI Amsterdam has a tender board which assesses all purchase orders above a given threshold amount for compliance with regulations and, where necessary or desirable, formulates calls for tender.

competition rules

RAI Amsterdam holds various event-related permits and certificates. A unique cooperation with the City of Amsterdam has meant that RAI Amsterdam is the first private company in the Netherlands to be given the authority to regulate and enforce event-related permits in a number of fields. To ensure compliance with legislation, RAI Amsterdam has an internal permit office which is charged with applying the policy and issuing and enforcing permits.

internal permit office

To ensure compliance with tax laws, RAI Amsterdam makes use of advisors – some of whom are affiliated with the accountant and some who are not – to assess RAI Amsterdam’s processing of tax legislation. The two most important types of tax for RAI Amsterdam are VAT and corporate tax.

tax legislation