Annual and Sustainability Report 2020

ANNUAL AND SUSTAINABILITY REPORT 2020 Year 2020 Responsible towards the players Responsible business operations Responsible for Veikkaus´employees Board of Directors' report and Financial Statement 1 ANNUAL AND SUSTAINABILITY REPORT 2020 Contents Year 2020 Responsible business operations Board of Directors' Report and Financial Statement • A word from the President and CEO 4 • Responsible marketing, communications, and reporting 34 • Board of Directors' Report 59 • Operating environment 5 • Ethical decision-making 36 • Statement of comprehensive income 67 • Lottery Act reform 5 • Responsible procurement 37 • Balance sheet 67 • Veikkaus in brief 6 • Fighting crime and fraud 38 • Cash flow statement 68 • Mission, vision, and values 7 • Data protection 39 • Statement of changes in shareholders' equity 68 • Strategy 7 • Certified data security39 • Accounting principles 2020 69 • Veikkaus 2020 11 • Environmental responsibility and fighting climate change40 • The CSR Programme 12 • Cost-effective operations 41 ATTACHMENTS 58 • CSR management 15 • Revenue to society 41 • Working for responsibility in the • Gross gaming revenue by games and game groups 74 gaming industry 16 33 • Development of profit 2018–2020 74 • Stakeholder cooperation • Other operating income 75 17 Responsible for Veikkaus' employees • Depriciation and impairment 75 • Meaningful work 43 • Services purchased 75 • Mutual trust and well-flowing work44 • Other operating expenses 75 3 • Growth opportunities and skills development 45 • Research and development expenses Responsible towards the players 7476 • Coaching management 46 • Financial income and expenses 76 • Promoting authenticated gaming 21 • Wellbeing at work and occupational safety and health 47 • Tangible assets and depreciation 77 • State-of-the-art gaming control tools and supporting • Compensation 48 • Intangible assets and depreciation 78 players in the self-management of gaming 22 • A culture that fosters responsibility and caring 49 • Cash flow from investments and investments in progress 78 • Our cooperation with Peluuri 25 • Prevention of employees' gambling problems 50 • Leases 79 • Financing the research into gamingrelated harm by • Equality and non-discrimination 50 the Ministry of Social Affairs and Health and the • Non-current investments and other long-term receivables 80 operations of Finnish Gambling helpline Peluuri 25 • Current reveivables 80 • Promoting safe gaming through data, • Cash and short-term investments 81 surveys, and research 26 42 • Shareholders' equity and equity management 81 • Age limit control of gaming 29 GRI • Employee benefit obligations 82 • Secure payment and money transactions 30 • Current liabilities 83 • Reliable and secure processing of player data 31 • Related party transactions 83 • Strong consumer protection 31 • Leases and other contingent liabilities 84 • Responsible and competitive game • Signatures of the board of directors' report and the financial products and services 32 20 51 statements 85 Year 2020 Responsible towards the players Responsible business operations Responsible for Veikkaus' employees Board of Directors' report and Financial Statement 2 YEAR 2020 3 ” We made major decisions to A word from the build a more responsible President and CEO gaming environment in 2020.” The year 2020 will remain in history as an excepti- Despite the challenges and insecurity caused by Veikkaus’ objective is to make all of its games sub- onal year. The coronavirus affected our activities in the epidemic, we made major decisions to build a ject to authentication in 2023. By adopting compul- a way no-one could have foreseen only a year ago. more responsible gaming environment in 2020. We sory authentication, we aim to reduce problematic To Veikkaus, just as to many other companies, the updated both Veikkaus’ strategy and responsibility gambling. When the games can only be played year of the coronavirus was challenging; however, policy. The updated strategy is based on an even authenticated, we can offer our customers effecti- it was also a year of positive, remarkable solutions safer and more responsible gaming environment. ve tools for gambling control, and the players can, that have enabled the building of a more responsib- e.g., opt for total gambling self-exclusion. What is le gaming environment. To boost the implementation of the revised strategy, more, compulsory authentication facilitates age li- we made many major decisions and took a variety mit controls and helps us to prevent money laun- We had to take major decisions on a tight schedu- of measures in 2020. We reduced the number of the dering and other criminal activities. When the sa- le at Veikkaus due to the coronavirus epidemic, to slot machines in the retail network by 8,000, i.e., by fer gaming environment, enabled by authenticated protect the health of our staff, customers, and retai- 40 percent from the number of the previous year. gaming, is complete in a couple of years, Veikkaus lers. We first closed our gaming arcades and slot We also prepared, in many ways, for the compul- will be a trailblazer of responsible gaming even in machines in the retail network in the entire country sory authentication introduced to the slot machines the global context. We also believe that the upco- for about four months in the spring, and then did in the retail network at the beginning of 2021 and ming new Lotteries Act will support us in this ob- the same thing again at the end of November in decided to bring forward the launch of compulsory jective. most of Finland. At the same time, we had to make authentication applied to the slot machine and table decisions some of which were difficult, in order to games at the gaming arcades, now planned to start I wish to thank our customers, employees, and all ensure Veikkaus’ operating capacity even in the fu- as early as summer 2021. In the summer, we are partners in cooperation for your good cooperation ture. The restrictions caused by the pandemic led also planning to make the physical slot machine during this exceptional, challenging year! Veikkaus to lay off temporarily some 660 gaming and table games subject to the same gaming limits arcade employees in May–June. At the end of the that are currently applied to the games in Veikkaus’ Olli Sarekoski year, another round of cooperation negotiations online service. It has been estimated that the com- President and CEO was held, covering ca. 800 Veikkaus employees pulsory authentication, together with the gambling Veikkaus Oy and leading to the layoffs of ca. 500 employees in control tools, will cut the players’ losses – and at the first phase at the beginning of 2021. The coro- the same time reduce the revenue to society – by navirus epidemic cut Veikkaus’ gross gaming reve- ca. 300 million euros every year. nue by over 300 million euros in 2020. Year 2020 Responsible towards the players Responsible business operations Responsible for Veikkaus' employees Board of Directors' report and Financial Statement 4 Operating environment Operations in the gaming industry are affected by many different driving forces. We revised our strategy at the beginning of the year under review, with an objective to pay optimal attention to our customers and the expectations Lotteries Act reform of our other stakeholders, as well as to respond to the challenges and opportunities of the changing operating At the end of January 2020, the Ministry of the Inte- environment. rior launched a project to reform the Lotteries Act in accordance with the Government Programme. The objective was to analyse the need to revise the legisla- THE DRIVING FORCES AFFECTING OUR OPERATIONS tion especially to further reinforce the prevention and mitigation of detriments caused by gaming. Another goal cited was to analyse the legislative means of supporting Veikkaus’ operational prerequisites in order to strengthen the monopoly system. Retail sales network Digital sales A working group was set up to implement the project, • Structural change of the trade sector • Intensifying competition brought by offshore with a representative from Veikkaus as a permanent • Changes in customer behaviour and operatioins, especially in fast-paced games specialist member. Veikkaus was also consulted in the purchasing habits, such as increasing • Older age groups adopting more and more different stages of the project. online sales online services • Increasing significance of mobile servises The proposal of the working group was prepared according to schedule at the end of November 2020. It will be sent out on a consultation round in January 2021. The Government bill should be submitted to Par- liament by June 2021 according to a decision on the schedule made during the State Budget preparations. After that, the Parliament would process the Lotter- ies Act reform during the autumn session, and the re- formed Act would enter into force mainly in 2022. The Lotteries Act reform is based on the Government Programme of Prime Minister Sanna Marin’s Govern- Reputation of gambling games Legislation and supervision ment. According to it, Finnish gambling policy aims to • Both responsible gaming and more • The challenges of a market which is rapidly mitigate the detriments of gambling by securing Veik- extensive corporate social responsi- growing more international and makes use kaus’ exclusive right with sufficient channelling capac- bility and sustainable development are of new technologies, including ity, and by ensuring its operational prerequisites in the increasingly important

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