Governance and risk management
to ensure resilience and long-term, sustainable growth
As a growing video technology company, we encounter both challenges and opportunities that must be addressed to preserve strong relationships with all our stakeholders.
At Milestone, we conduct our governance and risk management with the goal of remaining a value-driven and responsible company. As a truly global company, our governance measures are essential to running the business in an effective and transparent way. We believe in an open and trusting work environment in which our purpose, values, and behaviors serve as practical guidelines for leaders and colleagues.
The role of leadership
We are a Danish corporation that is governed by our Board of Directors in collaboration with our Executive Directors. Our Board of Directors has four shareholder-elected members and two employee-elected representatives.
Milestone’s overall objectives and policies are mandated by our Board of Directors who also approve targets and strategies and ensure that structures are in place to carry out our corporate governance. Topics and policies are presented at board meetings using an annual wheel that ensures that the Board of Directors discuss and approve our strategy outlook, budget status, financial results, and annual reports. In addition, the Board of Directors reviews policies, including accounting procedures, internal controls, information technology (IT), treasury, risk management and budgeting.
The Board of Directors also makes a yearly self-assessment of its own performance. It looks at the efficiency of the board, the board composition and dynamics, the processes supporting its work, the Chairman’s performance, and the collaboration with the Executive Directors. The assessment includes topics of governance and risk awareness, and how the Board of Directors evaluates risk management.
The Executive Directors are responsible for day-to-day management and compliance within the overall guidelines and policies approved by the Board of Directors. In this role, they present, submit, and recommend proposals for the company’s overall strategy and objectives to the Board of Directors.
The Executive Directors are our Chief Executive Officer and Chief Finance Officer. Together with our Chief Technology Officer, Chief Revenue Officer, Chief Marketing Officer and Chief People & Culture Officer, they constitute the Executive Leadership Team (ELT).
The six members of ELT collectively represent and govern the business divisions of Milestone. The ELT forms the strategies and drives the business operations, supported by a group of leaders in the Senior Leadership Team.
Communicating our strategy internally and externally
To convey our strategy and objectives to Milestone’s colleagues, the ELT has a keen focus on communication and visibility, which includes regular presentations of our culture, goals, and business news.
In 2021, we adjusted our strategy to form the Milestone Strategy 2026. The adjusted strategy defines future market opportunities, challenges, and our journey towards reaching goals for sustainable growth.
Our strategy defines our approach to customers, how we cooperate with partners, and our focus on culture and technological innovation. The strategy serves as an important foundation for our leaders to explain our company ambition to their teams. It also shows how everyone’s contribution connects to our overall objectives and ambitions.
Executing strategies and managing business growth requires a shared understanding of governance and risk management, and the ELT has a strong focus on ensuring that risk management is an integral part of the decision-making process.
Our governance and risk management systems support a sensible balance between growth and risk in the Milestone business model. In Business Support, we operate in three pillars: business risk, financial reporting risk and compliance risk. For each of these risk areas we identify, monitor, measure and manage the company’s risks. Our IT Division controls and monitors our IT security risks.
Our approach to risk management is formulated in our Enterprise Risk Management Policy. We have implemented an ongoing and cyclical process to report on activities within the areas of our business to identify risks. We mitigate risk by determining risk responses and actions. Identified risks are assessed in terms of impact drivers like ‘financial,’ ‘technology,’ ‘market,’ ‘brand,’ and ‘organization’. We also consider whether it is likely that an impact will take place.
With these processes, we identify and manage potential events that may affect Milestone’s ability to meet strategic objectives. The risk response activities are monitored and reported to leadership for an ongoing evaluation and update of processes.
These risk response activities are also integrated into the annual board schedule. The Board of Directors reviews the company’s risk exposure, the system for risk monitoring and reporting, and the company’s insurance coverage.
Milestone is exposed to financial risks, and currency risk is the main risk factor. These risks cannot be eliminated entirely. However, we actively manage potential risks in a transparent and disclosed way.
Our overall objectives and policies for financial risk management are outlined in an internal Treasury Policy which is approved by the Board of Directors.
Milestone has currency exposure resulting from reporting in Danish kroner (DKK) while generating the majority of revenue in euros (EUR) and U.S. dollars (USD). Transactions dominated in foreign currencies other than EUR and USD are not material.
When it comes to EUR, currency risk is limited due to the European Exchange Rate Mechanism II (ERMII) treaty between Denmark and the European Union (EU). The risk of fluctuations in the DKK/EUR rate is assumed to be insignificant. The currency risk related to generating revenue in USD is partly offset by maintaining a significant cost share in USD and partly by cash flow hedging.
Our USD cash flow hedging is based on a 24-month rolling forecast. A larger portion of the forecasted amount is hedged the closer the forecasted period gets. The hedging is approved on a monthly basis.
From ‘Group’ to ‘Systems’
In 2021, we merged Milestone Group and Milestone Systems. This is primarily a technical and governance measure to ensure a more simple and transparent financial structure. It will have no significant impact on our operations or on our reporting reflected in this annual report.
Identifying business risks
We have identified the relevant strategic business risks which our company may face in 2022. Our approach is to mitigate these business risks and define both the challenges and opportunities they might present to Milestone.
To support the risk identification processes, we have included a situational scan of Milestone’s market position and factors such as new regulations and policies, including changes in governments’ approach to globalization and regional markets.
Milestone has appointed risk sponsors and owners to focus on driving the mitigating activities and projects in the organization. They will help achieve clear risk ownership and create an embedded risk culture within the company.
Through this process, we identified our top risks, took action to raise awareness of each risk, and planned actions to mitigate its consequences.
Our primary risks include:
Global tech companies
Governance of video feed and AI technologies
Our leadership team have taken initiatives to mitigate these risks, and we continue to discuss tendencies and developments in our markets and how to pursue opportunities that meet us. Our strategic work is essential to the progress and continued development of our business.
Markets for video surveillance are impacted by new privacy and human rights driven regulations that put further restrictions on recording, use, and storage of video feeds. This also includes the governance of AI technologies. Milestone is on the forefront of this development by including compliance features in our software and by enforcing policies for responsible technology within our partnership and end-user relations.
We work closely with customers and end users to ensure our solutions are customized for specific needs and local regulations.