Governance and risk management

Corporate governance

RAI HOLDING B.V.
RAI Holding B.V. is a private limited company in accordance with Dutch law.

BASIS
Our governance is based on Book 2 of the Dutch Civil Code, the statures and various internal regulations, and the corporate governance code 2016.

STRUCTURE
The governance structure of RAI Holding B.V. includes a general meeting, Supervisory Board, Executive Board and works council.

Legal structure

RAI Holding B.V. is a holding. The Financial Statement states which companies are part of RAI Holding B.V. Wherever this annual report states ‘RAI Amsterdam’ it refers to RAI Holding B.V. and all its group companies. Group companies are participations in which RAI Holding B.V. plays a policy-deciding role.

RAI Holding B.V. and its group companies

Statutes

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

Corporate Governance code 2016

The Executive Board and Supervisory Board recognise the Dutch Corporate Governance code 2016. They apply the principles and best practice definitions therein, insofar as they apply to RAI Holding B.V.

code fully recognised

In some cases the principles and best practice definitions do not apply because RAI Holding B.V. is not quoted on the stock exchange and only has two shareholders. The following recommendations from the code are not applied (in full):

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

'explain'

Governance of Supervisory Board

The Supervisory Board regulations and the regulations of 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 actual regulations, and second, the regulations state that the Supervisory Board and Executive Board recognise 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 also be implemented as determined by the regulations. The Supervisory Board regulations are published on www.rai.nl.

Supervisory Board regulations in accordance with Dutch Corporate Governance Code

Supervisory Board tasks

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

supervising and realising employer and advisory role

Size and composition

The Supervisory Board preferably consists of five members. Because the Municipality of Amsterdam as a shareholder has indicated its intention to sell its interest, the vacancy of Supervisory Board member with preferential right from this shareholder has been kept open, and the Supervisory Board performed its tasks with four members. 

five persons, 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  www.rai.nl.

profile determines composition

The Supervisory Board is composed in such a way that, in accordance with the governance code, its members can function independently and critically with regard to other members, the Executive Board and any other partial interest. Each Supervisory Board member should be able to evaluate the outlines of the total policy. Additionally, all members have a specific 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, Remuneration Committee and 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 www.rai.nl. The composition of the committees is indicated in the Statement of the Supervisory Board, under ‘Committee reports’.

three committees

Step-down roster

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

Step-down roster

Maximum of three terms (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
A.M.H. (Annemarie) van Gaal 15.09.2015 1st 15.09.2019
M. (Mariëlle) de Macker 17.03.2017 1st 17.03.2021
J.W.Th. (John) van der Steen 07.04.2011 2nd 07.04.2019

Training

After 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, specific aspects of RAI Amsterdam and its business activities, and the responsibilities of the Supervisory Board members.

introductory programme for new Supervisory Board members

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

supplementary education and training

Shares, options, loans

The Supervisory Board members were not provided with shares and/or options or similar rights for obtaining shares in the capital of the company, nor did they acquire any loans and/or securities.

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

Remuneration

The remuneration is described in the financial statement in the section ‘notes on the consolidated annual accounts'. The remuneration report is published on www.rai.nl, including the policy and application thereof in 2017.

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 Supervisory 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 www.rai.nl.

Shares, options, loans

The Executive Board members do not receive any shares and/or options or similar rights for obtaining shares in the capital of the company, nor did they acquire any loans and/or securities.

no personal loans and/or securities provided

Remuneration

The remuneration of the Executive Board is also included in the financial statement in the section ‘notes on the consolidated annual accounts'. The remuneration report including more detailed information on the remuneration of the Executive Board, and the policy and application thereof in 2017 are published on www.rai.nl .

included in Financial Statement and remuneration report

Employee governance

Code of conduct

RAI Amsterdam is aware of its social role and the resulting responsibilities towards all parties. The actions of RAI Amsterdam and its 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 of everyone who represents RAI Amsterdam. The instructions given by the code of conduct are unconditional and not influenced by financial goals. The Code of Conduct was implemented on 1 September 2006 and is published on www.rai.nl.

applicable standards

Whistleblower scheme

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

procedure for reporting suspected violations

Risk management

RISK ANALYSIS AND CONTROL
RAI Amsterdam has systems for risk analysis and control in place and distinguishes between strategic, financial/administrative and operational risks.

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

FINANCIAL/ADMINISTRATIVE RISKS
Financial/administrative risks are associated with developments in the financial market and financial & administrative management.

OPERATIONAL RISKS
Operational risks are related directly to business activities.

RISK APPETITE
RAI Amsterdam applies a maximum risk appetite of €10 million.

Risks

We recognise ten 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 against the risk of terrorism
S-6 market development: the risk that our own concepts become smaller due to online business models
S-7 [this risk isn’t clarified for competition reasons]
S-8 loss of outbound sales agents
S-9 market development: growth of own events is limited
S-10 market development: exhibitors use other channels to reach their target groups in the future

The first five strategic risks have not changed from the previous year, while the second five were added in the reporting year.

strategic risks

We recognise ten financial/administrative risks:

F-1 financing risk (including not being able 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 financial control
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

These financial/administrative risks are the same as in 2016.

financial / administrative risks

We recognise 19 operational risks:

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 national strike
O-9 failure of installations essential to an event (cooling, heating, power etc.)
O-10 failure of in-house operational ICT systems (administration, operations)
O-11 failure of event network for exhibitors
O-12 third party demands on ICT infrastructure and public services at RAI Amsterdam grow faster than we are able to upgrade/expand
O-13 organisers, exhibitors and/or visitors use the (public) infrastructure differently than expected, resulting in major disruptions
O-14 privacy violations due to misuse of data
O-15 data theft by hackers
O-16 presence of asbestos in old building
O-17 developments in the market and demands from the organisation go faster than the IT infrastructure
O-18 lower profits from connectivity services
O-19 damage to reputation (going viral via socialmedia)

Two risks were removed from the 2016 list of operational risks: lengthy malfunction of ticket websites, and database integrity. Risks O-17 to O-19 have been newly added.

operational risks

Risk evaluation method

Evaluating the actual risks for RAI Amsterdam involves 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 intended 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 risks as indicated above. The colours represent the following risk levels: low risk level (blue) medium risk level (grey), and high risk level (red).

evaluation of risk impact

Risk matrix

Risk and consequence determine risk level

Risk matrix

RAI Amsterdam’s Executive Board has set a maximum risk appetite of €10 million. The company has a sufficient buffer to deal with the effects should an impact of this magnitude occur.

risk appetite

 

The risk management system for 2017 is the same as in 2016.

risk management system

The matrix shows that only some strategic risks are marked as high risk. These are:
S-4 (exploitation risk: the loss of a major exhibition organised by a third party)
S-5 (security against terrorism)
S-7 [not clarified for competition reasons]
S-10 market development: exhibitors use other channels to reach their target groups in the future

Risk S-1 (exploitation risk: the loss of one of the RAI’s own major exhibitions) is no longer considered a high risk. The risk became a reality in 2017 when the AutoRAI and BedrijfsautoRAI were cancelled and we were able to scale up the mitigating measures in time while making up for lost turnover by attracting new events and expanding existing events.

Discussed with the Supervisory Board

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

Internal risk management and control systems

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

S-4 exploitation risk: the loss of a major exhibition organised by a third party)
Relation management of the A accounts has been placed at the Executive Board level in order to prevent a large third party-organised exhibition or conference from being cancelled (risk: low, consequences: severe). Long-term contracts are implemented where possible. To minimise the consequences of the 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 alternative exhibitions and conferences for the future.

limiting risks related to third party events

S-5 (security against terrorism)
RAI Amsterdam has a Safety & Security Board that monitors and, where necessary, adapts the 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 limited by intensifying innovation and product development. The RAI aims to integrate new channels and connect them to exhibition titles, and also develop them autonomously to reach communities and inspire people in this way.

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

share price risks

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 thereby forecasts the available liquidity limits the liquidity risk to which RAI Amsterdam is exposed. If the liquidity risk increases, RAI Holding B.V. has formulated measures which lead to an immediate lowering of expenditures.

liquidity risks

There are no major currency risks given that the operational cash flows and financing activities are principally denominated in euros.

currency risks

Interest rate risks relate mainly to loans taken out for the long term. RAI Amsterdam B.V. hedges the interest rate risk by fixing interest rates through interest rate swap contracts: such contracts were concluded in 2013 for the period up to 2020 for an amount of €44 million at the end of 2017. RAI Amsterdam pays an interest rate of 1.54% on the interest rate swap it signed with Deutsche Bank AG/Coöperatieve Rabobank Amsterdam U. A. On bank overdrafts the RAI pays a variable rate of three months Euribor plus an individual surcharge. The amounts hedged through interest rate swaps are smaller than or equal to the outstanding principal amount of the loans from Deutsche Bank AG/Coöperatieve Rabobank Amsterdam U. A. The interest rate swaps had a fair value of negative € 1,801,264 (ultimo 2016: negative € 2,696,262) on 31 December 2017. The nominal value of the interest rate swaps will be decreased during their remaining life (to 2020) down to zero.

interest risks

The current financing agreement will last until 2020. The uncertainty about the possibilities to attract financing is mitigated by maintaining 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 long before it expires.

uncertainty about the possibilities to attract financing

RAI Amsterdam has a tender board which tests 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 has various event-related permits and the following certificates: ISO-9001 (quality management), ISO-14001 (environmental management), ISO-20121 (sustainability of events) and OHSAS-18001 (occupational health and safety). 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.

environmental legislation

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, who 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