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ReadSoft
Risk Analysis
Market risks
Economy Software and solutions for document automation are generally not considered to
be particularly sensitive to economic fluctuations as this type of investment
is usually
made to reduce costs and increase efficiency.
However, a weaker economy entails a
risk to longer business processes, which
influence the customers’ decision-making
and propensity to buy.
The risk of a weaker economy is balanced
by the customers coming from different
parts of the world and from several
industries with different business cycles. To
be able to act early on deviations, ReadSoft
continuously follows the average lead-time
for the sales cycle. This is done on every
individual market and at an overall Group
level.
Competitors
ReadSoft’s products do well against the existing
competition, both technically and in
terms of price. However, there is always a
risk that a new or existing player will develop
further refined technology in the future. To
counter these risks ReadSoft makes continued
large investments in research and development.
Another risk is the restructuring and
consolidation that is now underway in the
market for Document Automation. To
counter this ReadSoft has chosen to follow
an active acquisition strategy.
Technical development
ReadSoft is active in a dynamic IT sector
characterized by rapid technical development.
In order to ensure that the customers
are offered an attractive and competitive
product offering, ReadSoft continuously works
to develop new and existing products to
thereby strengthen its position as an innovator
and market leader. ReadSoft also has
well-defined processes for developing a concept
to a finished commercial product in the
most effective way. To maintain its position
at the cutting-edge of technical development,
ReadSoft also places major importance on
recruiting and skills development. The R&D
staff’s expertise, close collaboration with
major customers and research operations
contribute to ReadSoft being very well informed
about technical and market trends.
Operating risks
Intangible assets and disputes Potential faults that can arise in ReadSoft’s
products could lead to liability claims and
damages. ReadSoft has satisfactory insurance
protection for product liability, whereby the
direct risk should be considered limited.
ReadSoft continuously protects its technology
and products. The vital part of the
technology in ReadSoft DOCUMENTS for
Invoices is protected by Swedish and European
patents.
Furthermore, ReadSoft has
applied for patents on ReadSoft DOCUMENTS
for Invoices in the US.
ReadSoft also has international protection
for its trademarks.
Neither ReadSoft nor its subsidiaries are
currently party to any dispute, trial or arbitration
proceedings. Nor are there any known
circumstances that could be expected to lead
to a dispute that could damage ReadSoft’s
financial position to a not insignificant degree.
Customers and suppliers
As ReadSoft does not normally have any individual
customers that represent more than
1-2 percent of total sales over a 12-month
period, dependence on customers, and
thereby customer risk, is considered to be
limited in the present situation.
ReadSoft supplies third-party products as
a part of system installations. However, ReadSoft is not dependent on any individual supplier.
If collaboration with a supplier were to
end, there are potential and comparable
replacements.
Employees ReadSoft competes with a large number of
companies for professional groups that are
limited in size. To attract and maintain competent
personnel, ReadSoft has made extensive
efforts to create forms and systems to
stimulate and develop both the employees
and the work environment. Besides competitive
salaries, ReadSoft also has different kinds
of incentive programs and conducts recurring
activities to promote job satisfaction.
Financial risks
ReadSoft is exposed to financial risks that
may affect the company’s development. Financial
risks are managed pursuant to a
monetary policy established annually by the
Board.
Liquidity and financing risk
Both in the short and long term, cash and
cash equivalents are deposited in banks and
preferably invested in Swedish government
securities. To better deal with liquidity fluctuations
in the course of the year, the Group
has bank overdraft facilities, primarily through
the Parent Company but also locally through
subsidiaries. At year-end, the Parent Company
had bank overdraft facilities in the amount of
SEK 35.0 million (35.0) and SEK 11.9 million
(8.4) through subsidiaries.
Foreign-exchange risks
The Group operates internationally and is
exposed to foreign-exchange risks. These
arise primarily through the Parent Company’s
invoicing of foreign subsidiaries and partners,
which is mainly in EUR. To handle the currency
risk that can arise as a result of this, ReadSoft
can use forward contracts signed with external
parties. Decisions on hedging of currency
fl ows are made by the Board on a continuous
basis throughout the year. At year-end, no
currency hedges had been signed.
When foreign subsidiaries’ income statements
and balance sheets are translated, a
general change of +/- 1 percent in the rate of
exchange of kronor against euros and US
dollars would have an impact of +/- SEK 1.3
million on 2006 earnings.
