Operative risks

Variations in demand and number of students
Demand for education services is influenced by demographic factors as well as the deep trends in society and in the education system. An increase in the population and society’s willingness to increase investments in education services, combined with a positive attitude among the general public towards freedom of choice in education and independent education providers is driving demand for education services provided by independent players. As a result of this, more and more students are applying to independent schools and AcadeMedia.

AcadeMedia competes with both public and independent education providers. Should AcadeMedia’s reputation and attractiveness decline, this could lead to lower student and participant enrollment, which would affect sales and profitability. AcadeMedia has a good reputation and works systematically to improve quality in all segments and operations.

Should the demand for AcadeMedia’s education services and student enrollment decline, this could have a negative impact on the Group’s business, financial position and earnings.

Risks relating to the supply of qualified employees and payroll expenses
AcadeMedia’s operations are personnel-intensive and 63 percent of total costs consist of personnel expenses. A well-educated staff, including those in management, educators, preschool teachers and other staff, is a critical success factor in the ability to offer high-quality instruction and to have the relevant licenses for AcadeMedia’s operations.

Increased qualification requirements for teachers in combination with a general shortage of teachers and political pressure have pushed up teachers’ salaries. Salary increases, in part negotiated at the central level, with or without the limited involvement of AcadeMedia, may result in increased costs. According to the law on equal terms for independent and municipal providers, this should not affect AcadeMedia because school voucher funding should compensate for salary increases. However, there is no guarantee that any salary increases will be compensated for by a corresponding increase in school voucher funding immediately or at all.

AcadeMedia has highly skilled employees and offers continuing professional development. There is, however, always a risk that individual employees will not perform in accordance with the Group’s quality requirements. AcadeMedia carefully monitors how operations are developing and has the capacity to efficiently handle employee professional development.

Due to the Group’s decentralized organizational structure, AcadeMedia is dependent on the heads of the different segments, education directors, unit head and school principals at the various units, whose responsibility it is to ensure that employee performance is in line with the established standards and internal guidelines

From a business perspective it is very important for AcadeMedia to have good relationships with its employees. Just as in all businesses, however, conflicts and differences arise from time to time in these relationships. There is a risk that such disputes and differences of opinion may occur within AcadeMedia in the future, which could result in strikes or other disruptions.

Risks relating to quality shortcomings
The education units operated by the Group are scrutinized and monitored by the Swedish Schools Inspectorate, municipalities and other education clients with which the Company enters into contracts. AcadeMedia constantly monitors its operations to gain an assurance that they are living up to the Group’s high quality standards. AcadeMedia also ensures that the schools are run in compliance with agreements entered into and applicable laws and regulations. Any shortcomings in internal operational control could lead to fines, penalties or other sanctions, and result in negative publicity and diminish the attractiveness of the Group’s programs.

AcadeMedia’s reputation and brand
Schools and education programs impact peoples’ futures and there is a high level of interest and engagement among students, parents, authorities, the media and other stakeholders.

Dissatisfaction with the Group’s operations or any regulatory violations could lead to individual schools being reported to the Swedish Schools Inspectorate, which in turn could lead to scrutiny and legal proceedings against AcadeMedia and its employees.

Information on regulatory violations or perceived problematic situations could also be quickly spread in the media and lead to extensive negative attention, which could also damage individual schools and the reputation of the brands. A poor reputation for a certain school reduces the possibility of attracting new students to that particular school and thereby has an effect on the Group’s sales and profits to some extent. AcadeMedia is, however, prepared to act swiftly and forcefully to handle any conflicts that arise. A significant and poorly handled negative event could damage the AcadeMedia Group’s reputation. Extensive investment by the Group in quality initiatives, quality follow-up and an exchange of experiences all reduce the risk of serious reputation crises.

Negative publicity generated by the shortcomings of other private education companies may impact AcadeMedia indirectly in that it could damage the reputation of independent schools in general, and the authorities and the general public could be less inclined to permit or use independent education services.

Licenses
The Group has licenses to operate independent schools at the preschool, compulsory and upper secondary levels. The Swedish Schools Inspectorate, which is the supervisory authority for compulsory and upper secondary schools, conducts regular inspections of the Group’s schools. These inspections may lead to proposals on actions to take. Any proposed actions are normally attended to immediately. If the schools do not follow the Inspectorate’s instructions, penalties may be imposed or education licenses revoked.

Responsibility for complying with the requirements of the Swedish Schools Inspectorate is delegated from the provider to the school principals, but is coordinated at the group level for the purpose of improving and ensuring compliance with rules and regulations.

Licenses to operate preschools in Sweden or Norway are granted by the respective municipalities.

The conditions and education quality requirements with respect to adult education are stipulated in the contract the Company signs with the National Employment Agency or the municipality.

Liability and property risk
Any missteps or shortcomings in operations could lead to claims for damages. The Group has centrally coordinated insurance protection and access to external insurance advisors. The Group has adequate insurance protection and the direct risk is therefore deemed limited.