Risk management
Kroton constantly analyzes risks that may affect the businesses, its financial situation and operational results. This involves constant monitoring of the macroeconomic situation and the sector, as well as the regulations and laws governing the sector and its activities. The objective is to ensure effective short, medium and long-term planning and preparedness to implement preventive measures.
All measures taken reflect understanding and current positioning in relation to each one of the risks to which the company is exposed. These may undergo significant changes in accordance with alterations in the conjuncture.
The main risks monitored by the company in 2014 included.
Risk: acquisitions and legal reorganization
Kroton is the result of acquisitions of different companies, and part of the growth strategy is based on the continuity of this type of transaction. Company reorganizations entail a number of risks that could adversely affect operations and revenues.
Response: the company has a successful track record in acquiring and integrating operations. This success is due to careful planning, resulting in investment decisions based on well-grounded expectations about what each new acquisition may add to Kroton's image and to its financial performance.
Risk: competition between courses and geographical strategy
Competition is growing significantly for each course the company offers and in each region in which it operates. If Kroton does not compete efficiently it may lose market share and profitability.
Response: to distinguish itself from other institutions and to ensure fair competition, Kroton offers quality products and services in higher education by means of a differentiated academic model. The company uses unique teaching systems for basic education. It has leading brands in its market segments. These are highly visible in the regions in which the organization operates and are aimed at different publics.
Risk: payment default
Higher default levels in payment by students or by associated schools can negatively affect company performance.
Response: Kroton employs diverse tools in managing its portfolios, such as internal and outsourced collection processes aimed at identifying and contacting students and partners, providing renegotiation options and other differentiated solutions. The company created a department focused on credit and collection to manage these processes, which include mechanisms to send text messages, emails and letters to those in default. The company also relies on diverse government lines of credit, such as Fies, and private ones (via financial institutions), which enable students to pay for their tuition after the end of the course.
Risk: teaching quality
The company intends to maintain teaching quality throughout the network, including the associated schools that use the Pitágoras network teaching methodology and materials.
Response: in addition to having quality systems and trained teams that are qualified to support the entire network, including the associated schools, Kroton constantly monitors the quality of its faculty. In higher education, teachers, teaching coordinators, educational advisors and directors are offered a range on ongoing programs covering teaching methodologies, subject areas, as well as information and digital and analogical communication technologies applied in the classroom.
To learn more about risks, see the 2014 reference form (Formulário de Referência), available at ri.kroton.com.br.
Ethics and integrity
The Code of Conduct sets forth the ethical guidelines to be followed by all Kroton employees both internally and in their relations with outsiders. The company seeks to ensure that all employees and stakeholders understand and follow the guidance contained in the document, which is available on the corporate extranet.
Suppliers: the document stipulates adjustments in conduct or the termination of supply contracts if reports of child or forced labor are confirmed.
Government and authorities: the company is compliant with all its tax and labor obligations.
Shareholders: material facts are communicated via the Investor Relations area. Decisions and information related to negotiations with shareholders are handled with full confidentiality, until they are made public.
Community: Kroton contributes to local development via projects executed by its teaching institutions.
Trade unions and industry associations: employees and teachers are essential for the company's success. The document establishes the right to free union association and collective bargaining, in accordance with applicable legislation.
There is the Canal Confidencial (Confidential Channel) through which employees, suppliers and partners may report situations where company ethical values and principles are being violated or put at risk. All reports are addressed and investigated. The channel is available via the extranet and intranet.
Another communication channel Kroton maintains with its diverse stakeholder groups is the General Ombudsman, which may be used for all types of grievances or complaints (including grades, attendance, teachers and infrastructure) and praise. The channel may be accessed via a link in each institution's website.