Operating environment 2024 - Erillisverkot

Annual report 2024: Operating environment

The year 2024 was important both economically and in terms of security policy. The year was also diverse and challenging, but at the same time full of new opportunities. Erillisverkot quickly adapted to the changing operating environment and continued to implement its strategic goals in national and international contexts.

Economic situation and government austerity pressure

The economic situation in Finland remained challenging. The central government productivity programme was published, with the aim of saving EUR 393 million in public expenditure. This was reflected in tighter budgets in central government and also put pressure on the cost-efficiency of ICT services. The high inflation slowed down during the year, and the rise in interest rates halted. However, the recession in the construction sector and the shortage of resources, particularly in the ICT sector, made the recovery of economic activity more difficult.

Government deficit and public expenditure

Finland’s public finances continued to be in deficit. Rapidly growing public expenditure, such as the initial costs of the social and health services reform, combined with slower-than-expected growth in tax revenue weakened the financial balance. Public finance adjustment measures were initiated, but their effects will only begin to be visible in the coming years. For example, the productivity programme specified in the Government’s spending limits session aims to generate significant savings in the long term.

The economy faced significant uncertainty, and the difficult economic times continued globally, even though the rise in inflation and interest rates reversed.

Changes in the security environment

The challenging international security situation became more evident. The European security situation remained difficult. Russia’s continued war of aggression against Ukraine, conflicts in the Middle East and Asia and the effects of the US presidential election increased uncertainty. The challenging security situation emphasised the importance of securing the operating conditions of security operators and authorities in all circumstances, especially with regard to critical ICT services.

Finland’s membership of NATO opened up new opportunities, but also set requirements for Erillisverkot’s services in international cooperation and ensuring domestic security. Deeper NATO cooperation is imminent, which brings with it both threats and opportunities regarding Finland’s security solutions and compatibility with the organisation’s operations.

Technology, research and development

The adoption of new technologies, such as AI and cloud services, requires significant investments, but they can quickly improve the efficiency of security operators. Security operators must be involved in developing solutions to make them suitable for them. As technology develops, the use of satellite technologies, such as imaging, data traffic and time and location information, increases among security operators.

Erillisverkot has been actively involved in the development of both Galileo PRS and the European Critical Communication System (EUCCS), which are also the most important projects of the European Commission (EC) in the area of internal security. In addition, Erillisverkot has worked closely with its key customers to produce solutions aimed at improving the efficiency of operations in the future.

Labour situation and competition for talent

Although the number of jobseekers has been growing in many sectors, there is still a shortage of competent labour in the ICT sector, especially in terms of skilled and experienced professionals. Furthermore, the public and the private sector compete for the same ICT professionals. Erillisverkot and other state-owned ICT operators are investing in the development of diversity and well-being at work as part of their strategy to respond to this competition. The approach is an important part of the HR strategy as it helps to attract and retain talent.

Climate change and sustainability

The effects of climate change, such as increased extreme weather phenomena, challenged the continuity of our services. Although the economic situation calls for savings, sustainability goals, such as reducing emissions, remain central. Erillisverkot is committed to the carbon neutrality target for 2035, and it invested in the development of energy-efficient solutions. In sustainability reporting, preparations were made for the requirements of the Sustainability Reporting Directive (CSRD), which are likely to enter into force in 2025 for Erillisverkot – depending on the progress of the European Commission’s Omnibus Simplification proposal.

International cooperation

Erillisverkot continued international cooperation in the BroadNet-EU project and the Nordic public safety networks, for example. The Nordic operators of public safety networks – Erillisverkot, MSB in Sweden and DSB in Norway – expanded their cooperation by signing a memorandum of understanding to ensure the continuity of services in cross-border critical communications, including when communications move to broadband technology.

We signed a memorandum of understanding with the South Korean SafeNet network operator on the mutual exchange of information: thanks to strong telecommunications expertise, South Korea excels in the development of broadband communications between authorities.

Megatrends affecting the operations of Erillisverkot

Megatrend	Effect on operations
Social instability and inequality	The critical communication and operative services provided by Erillisverkot promote security and stability in society through the user organisations.
Digitalisation	The operations by the authorities depend on, among other things, reliable data, secure information systems and connections. For Erillisverkot, these create business opportunities in wireless data transfer and mobile communication service solutions for the authorities. Shared network and ICT solutions promote the national economy and security compared to a situation where each security operator or authority would have its own locally optimised solutions. The dependence of digitalisation on energy supply must also be taken into account: ICT solutions cannot function without electricity.
Economic transformation	The globally difficult economic times also have a negative impact on Erillisverkot’s profitability, resource availability, price stability and the customers’ purchasing power. Public finance adjustment measures have an impact on Erillisverkot, both directly and indirectly through our customers.
Increased security cooperation between the EU and the Nordic countries and NATO enlargement	Erillisverkot has a special-purpose role in providing critical security communications services across national borders, for example, the BroadNet EU project, the pan-Nordic public safety network service and the Galileo PRS service. Finland’s NATO membership brings additional requirements for Erillisverkot’s operations and services as well as new business opportunities.
Climate change and loss of biodiversity	The key to combating climate change is to reduce emissions and phase out the use of fossil energy sources. This guides our energy efficiency efforts. Adaptation to climate change and increasing extreme weather phenomena increase contingency requirements. The importance of precise, shared situational awareness and management as well as backup power and personnel arrangements is emphasised. These affect the continuity and contingency planning related to our services. All activities have an impact on the surrounding nature, and this is also true for Erillisverkot. We analysed our impact on biodiversity. We already take into account, for example, nesting times and the restoration of our footprint in our operations. However, we want to raise awareness of the topic so that we can find even more ways in which to have an influence.
Population ageing and sufficiency of workforce	The number of jobseekers has increased in many sectors, but there is still a shortage of skilled and experienced professionals in the ICT sector, in particular. Erillisverkot invests in the wellbeing of its personnel and attractiveness of the workplace, for example, by developing equity and diversity within the work community.
Increasing responsibility and sustainable development requirements	Erillisverkot is committed to becoming nearly carbon-neutral by 2035. The target is difficult to reach. We continue our systematic and transparent responsibility and sustainability work and the integration of these into our operations. In our own operations, we recognise the importance of equity and work community well-being, good governance and responsible procurement practices and human rights across the value chain. We prevent abuse related to these. With the CSRD directive, we are preparing to renew our sustainability reporting.