OP as a whole has major direct and indirect economic impacts on both Finnish society as a whole and on local households. OP Financial Group's operations are based on cooperative values, a strong capital base, capable risk management and customer respect. Based on its mission, OP Financial Group creates sustainable prosperity, security and wellbeing for its owner-customers and in its operating region by means of its strong capital base and efficiency. In its business role, the Group provides its customers with competitive products and services while ensuring its profitability.
Such indirect financial impacts are created through contributions to local and regional economic vitality, as well as social contributions. Examples of indirect financial impacts include hiring of new employees, purchases, investments, financing and tax payments. The role as a financier and insurer and responsibility for customers are emphasised during difficult economic times in particular.
OP Financial Group is one the largest tax payers in Finland measured by tax on profits. All of the 167 independent OP cooperative banks pay their corporate tax locally in their operating region. By paying taxes in Finland, the Group is contributing to prosperity in the whole of Finland.
In the financial sector, the major social impacts are related to active fighting of financial crime and abuses, including corruption, and removal of anti-competitive behaviour. We are strictly against any anti-competitive behaviour. OP is very serious about conformance to laws and the Code of Business Ethics. OP Financial Group does not support political parties or contribute to the electoral campaigns of individual candidates.
OP Financial Group, with a cooperative foundation, aims not to maximise profits for its owners but to provide, as efficiently as possible, the services which the cooperative's owner-customers need. A considerable part of business earnings are returned to the owner-customers. What remains of the earnings is used to strengthen the Group’s balance sheet and to ensure our ability to provide credit. We must operate efficiently and competitively while being profitable and having a strong capital base. We must produce the services our customers need at a competitive price.
External reporting is based, for example, on the International Financial Reporting Standards, the Finnish Limited Liability Companies Act, the Act on Credit Institutions, the Insurance Companies Act, the Accounting Act, and the standards and regulations issued by the Financial Supervisory Authority. OP Financial Group’s shared principles are applied in the accounting, financial statements and consolidated financial statements of OP Financial Group companies. Responsibility for the interpretation of, guidelines on and advice on standards, other laws governing the preparation of financial statements and official accounting requirements as well as the preparation of and compliance with common accounting policies rests with OP Cooperative, OP Financial Group’s central cooperative. Whenever necessary, OP Cooperative turns to auditors who give a statement of the selected principles and interpretations.
We are strictly against any corruption and bribery. OP is very serious about conformance to laws and the Code of Business Ethics. OP Financial Group does not support political parties or contribute to the electoral campaigns of individual candidates. The Code of Business Ethics document ratified by the Supervisory Board of OP Cooperative specifies that employees shall avoid any situation that may put them or OP Financial Group under suspicion of bribery. Our fight against money laundering and terrorism is guided by national legislation, official regulations, national practices and the anti-money laundering and prevention of financing of terrorism operating model approved by the senior management.
OP Financial Group uses Group-wide financial reporting and risk reporting to monitor the achievement of its business goals and financial targets, and these reports are regularly reviewed at executive management and OP Cooperative's Executive Board meetings. The very same principles apply to the monthly financial performance and risk report prepared by the management. When preparing and examining the report, the management ascertains the accuracy and correctness of the financial results and reporting by analysing the performance and risk exposure and any deviations from targets.
OP Cooperative's Executive Board is the highest decision-making body in matters associated with business control. The Executive Board must ensure that supervision of accounting and treasury is duly organised. It decides on reporting, procedures and qualitative and quantitative indicators used to assess operational efficiency and performance, discusses and approves the consolidated financial statements and interim reports.
The Supervisory Board's Audit Committee is tasked with assisting the Supervisory Board to ensure firstly that the central cooperative and OP Financial Group have in place an adequate and well-functioning control system to cover all operations and secondly that the OP Cooperative's accounting and treasury control is organised appropriately.
As provided by law, auditors shall assess the accuracy of financial reporting.
A compulsory online course for all employees of the Group was implemented to ensure familiarisation with the Code at all levels. The guideline for Handling Conflicts of Interest in OP Financial Group is intended to prevent cases of corruption. All of the Group’s member organisations are responsible for applying the guidelines internally. Each and every executive and employee within the institutions must know the guidelines. Every manager is in charge of supervising compliance with the guidelines, with the CEO and board of each organisation having ultimate responsibility. The guidelines concerning conflicts of interests must be handled by each organisation and its employees on a regular basis, and whenever a new person receives job orientation. OP has a security staff designated for the prevention of abuses, dealing with abuses originating from both within the Group and from outside it. Incidents that fulfil the criteria for crime are always reported to the authorities, to be investigated, and any abuses are reported to the relevant authority, such as the Financial Supervisory Authority, and internally to OP’s Executive Board. As prescribed in the Act on Preventing and Clearing Money Laundering and Terrorist Financing, we have put in place customer due diligence systems, ongoing customer due diligence methods and staff training, guidelines and protection. Any suspicious incidents will be reported to the Money Laundering Clearing House as required by law.
Our approaches are guided by the UN Global Compact initiative and the OECD Guidelines for Multinational Enterprises, among others.
Any grievances should be discussed primarily with the supervisor. Incidents that fulfil the criteria for crime are always reported to the policy to be investigated, and any abuses are reported to the relevant authority.
It follows naturally from OP Financial Group's dual role, brought about by customer ownership, that business profits and added value are channelled, via customer relationships, to its members and customers. Member cooperative banks use their profits for the benefit of their customers by providing loyalty benefits and other financial benefits and by maintaining and developing their service capabilities. In 2017, new OP bonuses totalled over EUR 220 million, up by 6% year on year. Furthermore a significant part of OP's economic impacts also involves indirect impacts on local and regional economic vitality. Examples of indirect economic impacts are:
Economic value generated and distributed by stakeholder groups:
|Direct economic added value created|
|Breakdown of economic value added|
|b) Operating expenses||619||661||574||640||767|
|c) Personnel costs||791||741||781||762||758|
|d) Returns to owner-customers||193||195||195||206||217|
|e) Income tax||36||308||249||223||223|
|f) Donations and other community investments||3||4||3||6||2,3|
|For strengthening capital base and developing business||807||749||1,007||1,073||1,095|
The member banks are often some of the largest taxpayers in their local municipalities, and OP as a whole is one of the biggest taxpayers in Finland. OP Financial Group's income taxes for the financial year 2017 totalled 223 million euros (223). The effective tax rate was 20.7% (19.6).
Climate change has extensive effects and it causes notable uncertainty for society. Together with our customers, we will build sustainable economy and support mitigating climate change and adapting to it. OP's direct impact on climate change is minor. Environmental risks, on the other hand, including climate risks, can have direct impacts on OP’s operations, as well as indirect impacts through effects on customers and stakeholders. In emissions and energy intensive sectors, climate change and related regulation may have significant financial effects. Indirect effects on climate change are created through OP financing and investments.
Extreme weather is also an operational risk included in OP's own contingency planning. Concerns related to climate change may pose reputation risks if any conflicts with climate change prevention efforts should be identified in the operations of OP or even those of its partners or customers.
On the other hand, the general improvement in environmental awareness is bringing new business opportunities, for example in the form of investment products that emphasise environmental responsibility, and diverse property insurances. Our non-life insurance business continuously monitors the development of risks posed by climate change from the viewpoint of our existing and future insurance products. Our aim is to cover all insurable risks as extensively as possible, also in constantly changing circumstances. OP assesses the financial implications of climate change risks in its annual response to the CDP survey.
OP’s nationwide network of banking and non-life insurance services seeks to ensure that customers have equal opportunities to carry out transactions. The service network covers both digital service channels (op.fi, OP-mobile and Pivo), telephone services and the network of branch offices. We are further developing our services by listening to our customers and their changing needs.
Pohjola Health Ltd has four Pohjola Hospitals that provide basic healthcare and special healthcare services, examinations, surgery and rehabilitation on an extensive basis. The hospital network will be completed in May 2018 when a Pohjola Hospital unit opens its doors in Turku.
To read more about indirect economic impacts and assessment of social and local impacts, go to the Local Impact of cooperate banks- section.
In 2017, the combined purchase volume of products, services, rights and the claims service partner network was approximately 1,700 million euros, provided by over 20,000 suppliers. Apart from this, the Group’s functions look after their own fundraising and investment-related acquisitions. OP is also a significant purchaser of goods and services.
The organisations of OP Financial Group apply a guideline entitled Procedures for Managing Operational Risk. In 2017, the central cooperative drew up a risk assessment plan by process. If necessary, the entities to be analysed can be agreed with the Group’s member organisations. OP Financial Group annually carries out risk assessments which also cover risks related to corruption.
The Group’s member organisations update their operational risk analyses annually based on the procedural guidelines. The risk analyses are based on the organisations’ self-evaluations concerning operational risks and their management. In line with the analysis process, each organisation identifies and evaluates the most important risks affecting its operations. To assist in identification, the Group has a shared risk library which lists diverse risks subdivided into seven risk categories. The Internal Abuse category includes the risk ‘Giving and Receiving Bribes’. Bribery has not been a significant risk in any of the risk assessments.
The Code of Business Ethics document ratified by the Supervisory Board of OP Cooperative specifies that employees shall avoid any situation that may put them or OP Financial Group under suspicion of bribery. A compulsory online course for all employees of the Group was implemented to ensure familiarisation with the Code at all levels. By the end of 2017, the course had been taken by 89% (100) of the personnel in Finland.
The guideline for Handling Conflicts of Interest in OP Financial Group is intended to prevent cases of corruption. All of the Group’s member organisations are responsible for applying the guidelines internally. Each and every executive and employee within the institutions must know the guidelines. Every manager is in charge of supervising compliance with the guidelines, with the CEO and board of each organisation having ultimate responsibility. The guidelines concerning conflicts of interests must be handled by each organisation and its employees on a regular basis, and whenever a new person receives job orientation.
In supplying services or goods to OP Financial Group, suppliers must comply with CSR supplier requirements, OP Financial Group's General Procurement Terms and Conditions and Code of Business Ethics as well as applicable laws and international agreements.
On 7 March 2017, the Finnish Financial Supervisory Authority issued a public warning to, and imposed a penalty payment of 400,000 euros on OP Helsinki due to shortcomings in investment advice related to the obligation to obtain information. The reason for sanctions was that OP Helsinki’s investment advice service had not made any adequate analysis of customers’ investment objectives, financial standing and investment experience before providing customers with investment advice. Furthermore, the bank had not documented and stored information on the investment advice given to customers so that such information could have been used to verify the courses of events afterwards. Corrective measures have been implemented at Group level: systems used in selling investment products have been further developed to ensure documentation and procedures complying with regulation. Furthermore, the Group’s investment advice guidelines were updated and additional training was provided to personnel.
Late in 2015, OP was requested to respond to allegations that it was engaged in monopoly practices. According to a competitor, OP has a monopoly position in retail banking services and is abusing this position by combining retail banking services with non-life insurance services. OP has also been claimed to offer non-life insurance services below production costs. This case is still under investigation, and OP wants to cooperate with the Finnish Competition and Consumer Authority and provide them with any information they may need.
The goal of OP's procurement function is to ensure that any products, services or rights that are acquired are on the whole cost-effective, of high quality and reliable and ethical and that suppliers are managed professionally to the benefit of OP Financial Group and its customers.
OP’s purchases and orders are based on Group-level framework agreements negotiated by OP Procurement or on OP Financial Group’s General Procurement Terms and Conditions. These agreements require that suppliers comply not only with OP’s CSR requirements for suppliers but also with OP’s Code of Business Ethics and with the Global Compact initiative, as well as with all the applicable laws and regulations.
Suppliers evaluate themselves in terms of corporate social responsibility for the first time when they take part in competitive tendering, and thereafter during cooperation with OP on a regular basis in accordance with the operating model agreed with OP Procurement. OP audits suppliers in accordance the annual CSR auditing plan.
Continuous follow-up of CSR audits forms part of OP’s supplier and CSR management model. This includes regular meetings with designated purchasing managers. OP’s CSR requirements for suppliers have been incorporated in purchase agreements since 2015. OP’s suppliers are mainly based in Finland, and they produce services mainly in Finland. Therefore, OP can manage the CSR risk level related to procurement through transparent and well-managed supplier cooperation.
UN Global Compact
Any suspected breach of rules or regulations by suppliers can be reported to the Vice President responsible for purchasing or to the responsible procurement manager. Such a report may also concern actions that are against OP Financial Group’s core values.
OP Financial Groups´s most significant locations of operation are in Finland. In 2017 about 90 % of procurement is spent locally in Finland.