1.1. Corporate governance and compliance

Explaining the impact

Managing the impact

Autonom has a strong commitment to corporate governance policies, driven by its established core directions. We are driven by integrity, respect for society, transparency and a systemic approach to risk and compliance management. We are confident that only by following our values and motivations will we achieve satisfaction in all areas of our business, but most importantly we will ensure the resilience of our business.

Organisational culture and values of Autonom

Mission

Autonom is a family company that thinks long-term. Success for us comes from customer satisfaction and colleague development. Business growth, profitability and financial stability are natural consequences.

Vision

Autonom’s vision is to be an authentic and sustainable business model.

• The management system and daily decisions are based on autonomy and are filtered through our value system;
• Autonom is a learning organisation. We encourage members’ personal development and support the ongoing transformation of the company;
• We have a positive impact on society and the environment by supporting education, active participation in our communities and responsible use of resources.

Autonom Group’s organisational culture is based on the following four principles:

• Supporting ongoing employee development: personalised training experience and reading as a job responsibility;
• Supporting flexibility: focus on employee well-being and the possibility of flexible working hours;
• Encouraging team involvement in the community: group employees have the opportunity, through the Autonom Foundation or other initiatives, to get involved in projects with a positive impact in the community;
• Facilitating an innovative spirit: internal programme for innovation proposals.

Autonom values are:

An important objective pursued last year was the development of the Autonom brand, by defining the positioning, the brand universe and the main communication directions. Thus, together with an external consultant, we outlined Autonom’s brand strategy for the coming years.

A well-defined brand strategy helps build a consistent and memorable image in the minds of consumers, build brand awareness and loyalty, and increase brand value in the marketplace.

By identifying values and promoting them in your company’s marketing messages and activities, brand strategy helps create an emotional connection and long-lasting relationships with customers, which can lead to long-term business success.

Company management

The company is managed by a Board of Directors consisting of 3 directors appointed by the AGM for a term of 4 years. The term of office of the 3 directors was extended in November 2022 for a further 4 years. According to Autonom’s Articles of Association, at any time, most of the directors of the Company will be non-executive directors. The Board of Directors supervises the work of the General Manager and any member of the Board of Directors has the right to request information from the General Manager regarding the operational management of the company.

The members of the Board of Directors are responsible for:

• Fulfilment of all obligations regarding the actual payments made by Autonom shareholders;
• Actual existence of dividends paid;
• The existence of the registers required by law and their correct keeping; The exact fulfilment of AGM resolutions;
• The fulfilment of any other duties imposed by law or by the Articles of Association.

The Chairman of the Board of Directors coordinates the work of the Board of Directors and reports to the AGM on the work of the Board of Directors. The Board of Directors may take valid decisions in the presence of a majority of its members, by majority vote. In case of a tie, the vote of the Chairman of the Board of Directors shall be decisive.

The professional seat of each member of the Board of Directors, as well as of the General Manager is in Piatra Neamț, 4 Fermelor Street, Neamt County.

The operational management of the Group is delegated by the Board of Directors to a Managing Director, who represents the company in dealings with third parties and in court. At present, Autonom’s General Manager is Mihaela-Angela Irimia appointed in this capacity on 1 November 2014, for an indefinite period.

Also, in the decision-making process, Marius Ștefan and Dan-George Ștefan, each as an employee of Autonom, have a decision-making role and a decisive contribution on the strategy and development directions of the group.

Autonom has a flat structure with 3 hierarchical levels: board of directors, managers and employees. All managers report directly to the board and there is no “management of managers”.

The company thus becomes a network: each branch is organised as a smaller company, with its own profits and losses for which the manager is responsible. Nearly 90% of decisions are taken within teams, without board intervention. Managers report to the Board of Directors their daily contributions and achievements, review their performance and often consult with other managers and the rest of the team, precisely to become accountable and motivated by their financial results.

In the last 5 years, none of the members of the Board of Directors or the Executive Team has been prohibited by a court of law from serving as a member of the Board of Directors or supervisor of a company. In the last 5 years, there have been no cases of insolvency, liquidation, bankruptcy, or special administration of companies, of which one of the members of the Autonom Board of Directors or Executive Team is a member. In the last 5 years, there have been no disputes or administrative proceedings involving any of the members mentioned above relating to their work in the company, as well as those concerning their ability to perform their duties in the company.

Management team

Autonom has implemented a succession plan for the top ten managers in the organisation. Autonom’s management team is a very stable one, with low staff turnover.

To have clear governance of our strategic objectives and to achieve results, we have created a structure that promotes sustainable business activities from strategic planning to operation and implementation.

Strategic decisions, including those related to sustainability, are made in consultation with the highest management body, consisting of the two Managing Partners and the Chief Operating Officer, and supported by input from departmental and regional directors.

The monitoring of the targets assumed by the sustainability strategy is done monthly and a full update of the data for the first half of 2022 was done in mid-2022, like the data in the 2021 Sustainability Report.

To strengthen the knowledge of all colleagues around sustainability, as well as to increase the capacity of key functions in the organisation, at the initiative of the sustainability department, monthly internal trainings were held during 2022, and some of them were attended by external trainers and relevant stakeholders from the capital market, sustainable finance, and consultants.

To further integrate sustainability into the business strategy and extend the positive impact to the relevant executive structures, the person responsible for implementing and monitoring the sustainability strategy, the Sustainability Director, has obtained an internationally recognised ESG certification from IASE (International Association for Sustainable Economy), thus validating the sustainability expertise. The Director of Sustainability is responsible for promoting sustainability internally and informing and training relevant functions and employees. Training is carried out internally on specific topics, according to a training plan based on the identified need. Training can take the form of thematic workshops to make information more easily accessible to target groups, on topics such as food waste, selective collection, Plastic Free July initiative, adoption of responsible habits.

Throughout the Strategic Sustainability Committee meetings, management is informed of new legislative requirements and specific sustainability rules that the organisation must comply with. At these meetings the Sustainability Director besides providing information also makes a presentation of trends in the field to channel preventive actions and alignment with EU requirements. The organisation’s management has sufficient information from the market at hand, being very well connected with business media and trends in sustainability. They actively participate in online or physical meetings on specific sustainability topics launched by sustainability consultants or other non-profit organisations.

Delegation of responsibility for managing positive and potentially negative impacts related to the sustainability area is made to the Sustainability Director. The Strategic Sustainability Committee, together with key departmental functions, analyses risks and opportunities, addresses measures to prevent negative impacts and launches internal initiatives to add value to the business.

The following map describes the roles and responsibilities in Autonomy to support the implementation of the Sustainability Strategy and its subsequent review according to internal needs:.

On specific topics, the representatives of any other team can be, by also included, as appropriate.

The role of the Sustainability Committee is:

• Integrate sustainability into business strategy by developing policies and procedures that incorporate sustainability into daily operations;
• Identify relevant material issues and associated positive and negative impacts on the value chain;
• Identify risks and opportunities on relevant material issues or key aspects of the business;
• Collaborate and engage stakeholders in a close relationship with the business to identify and meet their needs and expectations, and engage internal mechanisms to mitigate potential risks associated with an impact on the company’s financial capital;
• Making decisions based on internal risk and opportunity analyses around sustainability;
• Selection and monitoring of KPIs and relative targets included in the Sustainability Strategy;
• Track performance in terms of implementation of the Sustainability Strategy, progress vs. targets, KPIs and OPSs, in any relevant operational area;
• Overseeing the correct implementation of the Sustainability Strategy;
• Approval of new policies;
• Monitor the publication of annual Sustainability Performance Reports;
• Monitor ongoing developments in sustainable finance markets and financing instruments to keep in line with market best practice and analyse opportunities;
• Managing any future updates to the Sustainability Strategy, including overseeing the involvement of independent suppliers.
• Evaluation and management of different situations and critical concerns related to sustainability, including relevant material aspects supported by operational processes within activities

In relation to the individual performance of the key functions on the Sustainability Committee, each function is assigned specific annual targets for achieving goals, and performance is reviewed by the organisation’s CEO twice a year through progress reviews.

According to the remuneration policy, also available in the dedicated section of the website, the members of the Board of Directors are remunerated based on a fixed and a variable component.

Fixed remuneration is set out in the Management Agreements with the Company. The amount of the fixed remuneration is determined by reference to the work carried out by the members of the Board of Directors, the annual strategic objectives of the Company, the level of responsibility, the tasks to be performed by them within the Board of Directors.

The fixed remuneration is different for each member of the Board of Directors depending on the duties and tasks they perform. The fixed monthly remuneration will be reviewed annually by the General Meeting of Shareholders and approved by an Ordinary Resolution.

Variable remuneration is awarded in the form of multi-year bonuses, private medical insurance, private pension, benefits granted by Autonom for the position of member of the Board of Directors and is based on:

1. an individual assessment of the performance of each member;
2. the performance of the operational unit in which it operates;
3. the overall results of the Company achieved over a predefined period;
4. achieving the objectives set by the Company.

Each member of the Board of Directors will be informed of the evaluation criteria for the award of variable remuneration, which will differ according to their specific duties on the Board. Performance evaluation is carried out within a multi-year framework to ensure that the evaluation process is based on long-term performance and that the actual payment of the performance-based remuneration components is staggered over a period that considers the Company’s business cycle and the specific risks of the business.

The General Manager is remunerated based on a fixed and a variable remuneration. The General Manager shall be informed of the assessment criteria for the award of the variable remuneration. Performance evaluation is carried out within a multi-year framework to ensure that the evaluation process is based on long-term performance and that the actual payment of the performance-based remuneration components is phased over a period that considers the Company’s business cycle and the specific risks of the business.

The full policy can be found here.

Risk management and compliance

The effects of risks managed effectively and without complying with legal obligations, can attract financial penalties and damage the reputation and image of the brand, and the impact will result in revenue changes or even business interruption. Risk management involves not only uncovering and considering strategic and operational risks in an integrated way, but also identifying the steps we need to take to mitigate or even eliminate them. It is very important for us to have a clear picture of all the processes that take place within each agency or department.

Inadequate risk management can also have an impact on employee well-being and lead to potential redundancies. The effects can also be felt by the families and communities to which our employees belong, with the effect of reducing quality of life.

Incorrect or incomplete identification of certain categories of operational risks, as well as not complying with the legislative conditions in force, can generate effects and impact on the environment.

Our approach is a proactive one where we try to minimise the impact associated with each aspect, on the business and on our stakeholders. Relevant issues that may lead to risks are addressed immediately through annual reviews and we establish principles and processes to address them to minimise the risks to the business and stakeholders. At the same time, we know that it is only through such an approach that we will be able to assess the impact associated with each issue. We also identify opportunities associated with the business and are constantly proactive in addressing them.

Responsibility for risk identification and risk management lies with the Compliance Officer and the Compliance Committee. They, by applying an internal methodology based on assessment and quantification, make recommendations for approaches to mitigate identified risks and, by identifying opportunities, create internal programmes or projects to create more value within the organisation.

Risks identified at Autonom level, related to the company’s activity and the industry in which it operates:

Price Risk and Liquidity Risk

Price risk means that car leasing and rental companies are exposed to potential losses on car sales when the sale price is lower than the residual value. Any change in prices on the used car market may therefore have a negative effect on the revenue that the Company is able to generate from sales of used cars. Liquidity risk is associated with the Company’s holding of non-current assets. The Company assumes the risk of the residual value of the vehicles it operates under the operating lease and short-term rental (rent-a-car) service and which it sells at the end of the operating lease, i.e., after 24–48 months of use, usually as part of the short-term rental business. The Company carries out these sales operations systematically for a significant proportion of the car fleet in its portfolio, thus generating profit or loss from these activities. The amount of the proceeds from the sale of a used vehicle and the risk that the sales price of a used vehicle is less than the amount at the end of the operating lease or the period of use in the case of short-term leases are mainly determined by external factors.

Credit risk

Credit risk is the risk that the Company’s borrowers may not respect obligations when due, due to deterioration in their financial situation. The Company manages this risk primarily by diversifying its lines of business, customers, exposure to a particular industry or geographic area. In addition, the financial flows and statements of receipts and payments for each partner are monitored and controlled on a permanent basis, maintaining a real link with them.

Cash-flow risk

The Company requires a significant amount of cash to service its debt and make planned capital expenditures, and its ability to generate cash or to refinance its debt depends on many factors beyond its control. The Company borrows substantial amounts annually, consistent with the growth of its operations, through finance leases, bank credit and short-term credit facilities to finance acquisitions of new cars. To manage the risks, the company has implemented prudent financial management in order to have significant cash reserves, which will ensure sufficient working capital even in the scenario of delayed or diminished receipts over a long period of time.

Risks related to interest rate fluctuations

Most of the Company’s financing contracts provide for a variable interest rate, dependent on EURIBOR or ROBOR. Therefore, the Company is exposed to the risk of increases in these interest rates during the term of the financing contracts, which could result in higher interest being paid and could have a material adverse effect on the Company’s business, financial condition and results of operations.

The risk of the COVID-19 pandemic

Because in 2022 the movement restrictions caused by the COVID19 pandemic have been completely lifted, but the risk of new outbreaks is still present, on the precautionary principle Autonom has maintained the minimum requirements to prevent the spread of respiratory infections according to the legal recommendations in force. The rapid adaptation to the new reality, which has contributed to mitigating the negative effect of the pandemic on Autonom’s business, has already prepared the management for an appropriate response should a new state of emergency be declared, or new restriction measures be imposed. Investors are encouraged to consider that such events may have a negative impact on the company’s business.

The Company’s business may be affected by adverse developments in economic conditions

The dynamics of the Company’s business and profitability are sensitive to the general conditions of the economic environment in Romania, and a slowdown or recession in the local economy would reflect negatively on most operational parameters.

Risks of non-compliance with legislation

We ensure that we are up to date with applicable legislative requirements on employee health and safety, environmental legislation, personnel legislation, financial legislation, agency operating legislation, and adequately controlling risks across our operations. We have implemented management standards on quality, occupational and environmental health and safety (ISO 9001, ISO 14001 and ISO 45001). We have established strict compliance rules with all relevant internal and external regulations, constantly making every effort to minimise the risk of non-compliance. We are aware of these risks but manage them through constant awareness of applicable legal requirements, strict compliance monitoring on various operational aspects of the business, and intensive employee training and regular assessment.

We did not receive any non-compliance penalties during 2022.

Risks related to the decline in tourism and disruptions in the functioning of the air transport industry

Part of the Group’s activity, more specifically the short-term car rental service, is seasonal and may be affected by the evolution of tourism in Romania and the restriction of travel from other countries to Romania. In the event of a prolonged state of emergency or the imposition of general restrictions on air traffic to or from Romania, the rent-a-car line of business may be adversely affected. To manage this risk, management continuously monitors the activity of agencies located throughout the country, especially those located in airports, to control the operating costs related to their activity.

The company may not be able to sell the used cars at the desired prices, which could lead to losses

The company assumes the residual value risk of the vehicles it operates under the operating lease and short-term rental (rent-a-car) service and sells at the end of the operating lease.

The Company’s activity is dependent on the activity of vehicle manufacturers and distributors

The company purchases vehicles from more than 50 vehicle manufacturers and dealers and is dependent on supplying popular, high quality vehicle models in sufficient numbers to maintain operations and purchasing them on attractive terms. There can be no assurance that the Company will be able to maintain a long-term relationship with these manufacturers and distributors that will provide certainty with respect to the Company’s future purchases of vehicles, and the Company may have difficulty replacing these manufacturers and distributors with other suppliers who will deliver the vehicles required for the Company’s business on the same favourable terms.

Global shortage of semiconductors and chips could lead to delays in vehicle deliveries by manufacturers or distributors

The COVID-19 pandemic has generated a global shortage that is anticipated to continue in the semiconductor and chip industry and therefore in the automotive production and supply chain. It is possible that the Company’s manufacturers and distributors may experience significant delays in the delivery of vehicles ordered by the Company. As a result, the Company may face a reduced ability to renew its fleet within the timeframes set out in its contracts with its partners and at a level commensurate with changing demand. Any limitation on the Company’s ability to renew its fleet may lead to an increase in the operating time of vehicles and a decrease in the level of customer satisfaction with the compliance of vehicles with expectations. At the same time, a longer vehicle operating life may have a negative impact on the second-hand selling price of those vehicles.

Environmental and climate risks

Sustainability concerns and related performance have been a strong foundation for the rapid implementation of a climate risk management process. Practising governance has allowed us to easily develop a fair TCFD reporting framework. Autonom has committed to and delivered on the statement in its 2021 Sustainability Report that it is starting the process of aligning with the TCFD. The results show a deeper understanding of specific climate change risks and have provided us with a climate risk roadmap and financial impact scenarios for those physical and transition risks that could affect the company’s business.

There is no litigation and no litigation related to environmental protection is expected to arise, as we have implemented the environmental management system and keep legal compliance under control.

Effectiveness of actions taken

Climate risks

This reporting year we have expanded our risk management system to include the area of climate change risks and opportunities that have the potential to impact our business. Thus, for this first initiative we used the reporting framework developed by the TCFD (Task Force on Climate-related Financial Disclosures).

We have identified several risks with a potential effect on our company, analysed them in terms of their impact on the company, assessed them quantitatively and formulated appropriate and feasible response methods for our business, aligned with our strategic objectives.

To achieve these activities, we involved members of the Board of Directors and managers of the departments: Sustainability, Special Projects, Operational, Technical, Risk, Marketing, Rent a car, Lease and Second car divisions.

To provide continuity and replicability to this analysis, we have developed a first draft of a specific climate risk management procedure to be developed during FY2023. Once this procedure is finalised and implemented, the position of Climate Risk Officer, a position specifically dedicated to this issue, will be defined.

Transition risks

Based on the specifics of our activities and considering the market situation, regulations and trends in the field in which we operate, we have identified 13 risks and 1 transition opportunity. These are indirect risks and opportunities that resulted from the way climate change is influencing society today, such as through the development of new regulations to combat climate change, adaptation/change in technology to cope with new technical requirements resulting from climate change adaptation, changing market dynamics, changing consumer interests, development of new reputational values for companies.

The transition risks and opportunities identified are as follows:

Physical risks

Using recognised databases and platforms for modelling the evolution of climate parameters, we have identified physical climate risks that have a direct effect on our business.

Physical climate risks are direct risks resulting from global climate change. There are two main categories of physical risks: acute (occurring in the short term and generally represented by extreme climate events) and chronic (occurring in the long term and generally represented by changes in key climate parameters).

The physical risks identified are:

1. Intensification of strong wind events
2. Intensification of hail events
3. Rising average temperatures
4. Changing precipitation patterns

There may also be opportunities arising from physical climate change, with some operations becoming more favourable for certain areas of activity. In the case of our business, we have not identified any such situations.

After identifying risks and opportunities and analysing potential impacts, we carried out a series of quantitative assessments to formulate appropriate response methods.

International platforms specialising in scenario-based climate projections were used for these. Climate scenarios or socio-economic scenarios are projections of future greenhouse gas emissions used by analysts to assess future vulnerability to climate change. They are based on estimates of future levels of regulation, economic activity, governance structure, changes in population size, social values and patterns of technological change.

Transition risk assessment

The first step in quantitatively assessing transition risks was to rank them by scoring them according to the magnitude of impact on the company and likelihood of occurrence.

We then assessed the financial impact for 2 market risks: rising fuel prices and rising energy prices. These were chosen because they relate to the main operational expenses within our company that are directly influenced by transitional climate risks.

For this category we used two sets of scenarios depending on the risk analysed:

• Developed by the Network for Greening the Financial System (NGFS)
• Developed by the Energy Agency (IEA)

For each of the three climate scenarios, we have produced three financial models for each risk/opportunity based on our company’s development objectives.

Physical risk assessment

Depending on each identified physical risk, the parameter that can quantify the increase in intensity of the respective meteorological phenomenon and the appropriate database for its analysis were determined. Each was analysed, using the corresponding database, for two Autonom locations in Romania:

• Piatra Neamț, where the company’s head office is located, owned by the company
• Bucharest, where the company’s administrative office is located

For this category we used two sets of scenarios depending on the parameter analysed and the database queried:

• Developed by the Network for Greening the Financial System (NGFS)
• Developed by the Intergovernmental Panel on Climate Change (IPCC)

We assessed the physical risks in terms of the evolution of climate parameters in the short (2023), medium (2025) and long (2030) term according to climate scenarios. Following the analysis, these were categorised into risk grades according to: percentage deviations from the baseline year and potential impact on the company. All the parameters assessed had low risk grades with the highest percentage deviation from the baseline year being +14% for the long-term precipitation amount in Neamt county for scenario SP1–1,9.

Following these assessments, we have formulated a series of responses to address climate risks:

• Accessing funding for the renewal of the fleet with low emission vehicles and further accessing funding opportunities in this respect (in progress)
• Investigate the option of reallocating resources between the services offered, considering extreme events and the impact and impact on air traffic (rate of flight cancellations and delays)
• Implementation of a specialised digital platform allowing purchases based on specialised price and stock analysis
• Inclusion of an insurance company in the group, advantageous policies will be developed for risks of extreme events (in work)
• Negotiation and conclusion of framework contracts for electric car charging (in progress)
• The opening of national sites, which will be served by photovoltaic panels, thus offsetting the need for purchased electricity
• Preparation of the full scope 3 emissions inventory framework in preparation for enhanced reporting requirements (in progress)
• Implementation of the sustainability reporting assurance process (in progress)
• Continuing to take a greater interest in all communication initiatives and to keep records of every sustainability action undertaken or outcome or statement (ongoing)
• Implementation of additional sustainability reporting frameworks (in progress)
• Develop a project (concept stage) to supplement agencies with electric vehicle charging solutions
• Providing alternative charging solutions for customers
• Implement an investment programme at partner service level to increase capacity in the field of electric vehicles

Costs of managing risks or opportunities

One of the responses that addresses several climate risks, but also contributes to meeting the Net Zero scenarios, is to renew the vehicle fleet. This response is also aligned with our strategic objectives, and in the 2022 reporting year we took an important step in this direction. Thus, we have accessed funding from the European Investment Bank (EIB) for a €15 million grant that allows us to implement this method of addressing climate risks.

To model the costs resulting from the identified climate risks and opportunities, we used international price forecasting databases based on geographically adapted climate scenarios.

The financial impacts of fuel price increases and electricity price increases were analysed in terms of direct impacts (direct costs to Autonom) and indirect impacts (costs to Autonom customers using the fleet through the company’s services, to provide insight into the attractiveness of the vehicles to customers).

For more information on the climate risk assessment, you can access the full document here.

Other risks

Investors should note that the risks outlined above are the most significant risks of which the Company is aware at the time of writing. However, the risks presented in this section do not necessarily include all those risks associated with the issuer’s business and the company cannot guarantee that it encompasses all relevant risks. There may be other risk factors and uncertainties of which the Company is not aware at the time of writing which may change the actual results, financial conditions, performance and achievements of the issuer in the future and lead to a fall in the Company’s share price. Investors should also undertake the necessary due diligence to make their own assessment of the suitability of the investment.

Risk management by types and areas

• The Group pays particular attention to the way it selects and monitors customers for operating lease services;
• Major contract renewal rate of over 95% in the last seven years;
• The management of the customer financing decision making process and the monitoring of customer payment behaviour is carried out by the Finance and Risk Department;
• Autonom Services received assistance from the EBRD in 2017 to refine its commercial risk policy;
• Scoring methodology for risk categorisation, according to which the financing conditions and the required guarantees are determined;
• Customers are classified into four categories: very low risk (blue-chip), regular low risk, regular medium risk, high risk (non-financial);
• The risk analysis includes the analysis of financial information, as well as specific elements such as management experience, legal history of partners and directors, length of time the client has been in business, CIP check, verification of the existence of debts to the State, verification of pending files as a debtor etc.
• In the case of non-blue-chip clients, the Group shall ensure that payments are made on time by requesting personal guarantees from the administrators and associates by means of promissory notes endorsed in their personal name;
• The Group discourages late payments by charging high late payment penalties (up to 1%/day after the due date);
• High customer granularity (average fleet/customer ~ 5 vehicles, top 10 customers less than 30% of total operational leasing and rent-a-car turnover);
• Within a maximum of 2 months after the payment of the due lease instalment, the Group will repossess the vehicles;
• The group decides whether to sell or use vehicles returned early from operating leases as part of rent-a-car services, especially if the event occurred in the first part of the contract;
• The complementarity of the business lines in terms of flexibility in moving assets between the two categories of services represents a major competitive advantage for the Group from a risk management perspective.