Board of Director’s report 2019

The company recorded operating revenues of NOK 21,551 million in 2019 and strengthened its position with key customers and targeted segments. The Board sincerely thanks the management and employees for the hard work and commitment they have displayed throughout 2019.


The Board’s objective is to further develop DNV GL as a world leading assurance and risk management company.

A new corporate vision (a trusted voice to tackle global transformations) and new set of company values (we care, we dare, we share) were developed in 2019 and launched at the beginning of 2020. Many employees throughout DNV GL were involved in the process. The objective is to inspire and unite the company and give it a direction and ambition for the next decade, as well as to modernize and simplify the company values to ensure they resonate with employees today and in the future and contribute to achieving DNV GL's purpose and vision.

In the current strategy the ambition has been to direct DNV GL towards a digital, agile and efficient future. The strategy aims to leverage digital technologies to position DNV GL as a data smart company that can develop new revenue streams and market positions across all business areas.

DNV GL has conducted detailed analysis into understanding the energy transition. The transition will affect both DNV GL, its customers and society. Our research into the transition and technologies for the future shapes our thinking as we create our next strategy. Work on developing the 2025 strategy is well under way with a plan to have it approved by the end of the year.

The company is upholding its commitment to invest 5% of its annual revenues in research, development and innovation activities. More than half of these activities are dedicated to digitalization. DNV GL is actively pursuing joint innovation projects and partnerships with academia and business in areas such as artificial intelligence, machine learning and autonomous systems.

DNV GL will continue to develop its employees' skills and knowledge in order to stay at the forefront of technology and innovation and fulfil its purpose and vision.


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Financial performance

DNV GL Group recorded operating revenue of NOK 21,551 million in 2019, NOK 1,912 million more than in 2018 and representing growth of 9.7%. The sale of the KEMA Laboratories business in December generated a sales gain of NOK 141 million in 2019. The currency adjusted growth (6.3%) was primarily driven by regulatory requirements in the maritime industry and volume growth in the energy and oil & gas industries.

Maritime recorded revenue of NOK 7,744 million in 2019, corresponding to growth of 15.5% compared to 2018. Business Area Oil & Gas reported revenue of NOK 4,839 million, representing growth of 8.6%. Energy achieved 15.9% revenue growth and revenue of NOK 4,196 million, including the sales gain from divestment of the KEMA Laboratories business (3.9%). Business Assurance ended the year with revenue of NOK 3,626 million, in line with last year. Digital Solutions experienced growth of 14.7% in 2019 and delivered external revenues of NOK 1,046 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by NOK 1,557 million from NOK 1,972 million in 2018 to NOK 3,529 million in 2019. Of this, NOK 421 million comes from the implementation of IFRS 16 Leases, which technically led to reduced operating expenses and increased depreciation. The operating profit (EBIT) for 2019 ended at NOK 2,334 million, NOK 1,785 million up from NOK 549 million in 2018. The EBITDA and EBIT improvements are primarily driven by strong growth and financial performance in business area Maritime.

The net financial expenses were NOK 349 million in 2019, compared to NOK 273 million in 2018. The change from 2018 is primarily due to the implementation of IFRS 16, which led to a NOK 67 million interest cost on lease liabilities as well as interest expenses on a loan from the parent company, Det Norske Veritas Holding AS. The other main financial items are net interest costs of NOK 27 million from defined benefit pension plans, net currency losses of NOK 143 million and other financial expenses.

The 2019 tax expense of NOK 610 million represents an average tax cost of 30.7%. The average corporate income tax is 26% of the pre-tax profit from operations, while the additional tax cost is caused by withholding taxes on remitted earnings, losses from operations without recognition of tax assets and non-tax-deductible items. The net profit for the year was NOK 1,375 million, compared to last year’s net profit of NOK 116 million.

The cash flow from operations ended at NOK 2,679 million in 2019, compared with NOK 1,091 million in 2018. This improvement comes primarily from the strong financial performance (EBITDA) in 2019. The implementation of IFRS 16 had no net cash flow effect but led to an increase in cash flow from operations and a decrease in cash flow from financing activities of NOK 421 million in 2019.

The cash flow from investments was NOK 733 million in 2019. The net cash effect of divesting the KEMA Laboratories business in December 2019 was NOK 1,139 million. The investment of NOK 280 million in intangible assets relates to the development of commercial software within Digital Solutions, in-house Oracle ERP implementation and system integration in the business areas.

Financing activities of NOK 2,234 million, of which NOK 1,400 million pertain to the payment of dividend to Det Norske Veritas Holding AS, led to a net positive cash flow for the year of NOK 1,178 million.

At year-end, the DNV GL Group had liquidity of NOK 3,809 million plus an unused credit line of NOK 1,000 million. The Group has a strong balance sheet, with an equity ratio of 51.1% of total assets. A NOK 2,100 million dividend to the parent company, Det Norske Veritas Holding AS, and Group contributions after tax of NOK 131 million were declared in 2019 and reduced the equity accordingly.

A net actuarial gain of NOK 460 million from defined benefit pension plans was recognized in equity at the year-end.

The accounts of the parent company, DNV GL Group AS, show a profit for the year of NOK 1,478 million, mainly generated from dividends from subsidiaries and group contributions received. DNV GL Group AS has total assets 31. December 2019 of NOK 17,261million and a total equity of NOK 11,085 million. The Board proposes to transfer the profit for the year to other equity.

The Board confirms that the going concern assumption applies and that the financial statements have been prepared on this basis. The Board regards DNV GL’s financial performance as strong and liquidity as very good. Both parameters contribute to a robust platform to achieve our strategic targets and maintain our independence as a financially strong and trusted company. The Board also confirms that, to the best of its knowledge, the information presented in the financial statements gives a true and fair view of the assets, liabilities, financial position and results of the DNV GL Group for the period, and that there are no other material events after the balance sheet date affecting the 2019 financial statements.

Corporate risk management

The Board underlines the importance of continuously having a comprehensive understanding of the risks facing DNV GL that could affect corporate values, reputation and key business objectives. DNV GL has processes in place to proactively identify such risks at an early stage and initiate adequate mitigating measures and actions.

DNV GL’s risk management policy is part of the management system and ensures that the risk management processes and culture are an integral part of everything the company does. The policy is aligned with the ISO 31000 framework.

The Board formally reviews the risk management status and outlook twice a year. The review of risks and opportunities is conducted as part of both the strategy revision process and the annual plan process.

DNV GL calculates its risk-adjusted equity on an annual basis, taking into account the most important risk factors. Based on value-at-risk methodology, the analysis includes potential losses from operations, foreign-exchange exposure and pension plan assets and liabilities. The book equity less the maximum calculated loss illustrates DNV GL’s total risk exposure and the amount that can be lost in a worst-case scenario. This exercise gives the Board a measurable overview of the key quantified risks and DNV GL’s capacity to take on additional risk.

In order to mitigate cyber security risks, DNV GL’s information security management systems for GSS IT, Energy, Oil & Gas, Digital Solutions and Maritime are certified to the ISO 27001 information security standard. The Board continues to review the cyber security risk annually.

Severe quality, safety and integrity risks in the company represent another focus area. Numerous barriers exist to minimize the chance of such events occurring, and DNV GL’s management system is constantly being scrutinized to ensure that the company is managing this risk satisfactorily.

DNV GL’s main financial risks are its market risk (interest rate and foreign currency risk), credit risk, liquidity risk, pension plan risk and political risk related to trade sanctions.

Interest rate risk: as the company has limited borrowings, its exposure to interest rate risk is primarily connected to the risk of changes in market interest rates for DNV GL’s forward exchange contracts.

Foreign currency risk: DNV GL has revenues and expenses in approximately 70 currencies. Of these, six (NOK, EUR, USD, CNY, KRW and GBP) make up 77% of the total revenue. In most currencies, the company has a natural hedge through a balance of revenues and expenses. The foreign currency policy is to focus on hedging expected cash flows, primarily in US dollars. However, DNV GL is also materially exposed to the re-evaluation of balance sheet items, including net investments in foreign subsidiaries.

Credit risk: receivable balances are monitored on an ongoing basis, with the result that the company’s exposure to bad debts is limited. There are no significant concentrations of credit risk within the company. With respect to the credit risk arising from the other financial assets, which comprise cash, cash equivalents and certain derivative instruments, DNV GL’s exposure to this arises from any default of the counterparty, with maximum exposure equal to the market value of these instruments.

Liquidity risk: DNV GL monitors its liquidity risk on a continuous basis. The liquidity planning considers the maturity of the financial assets (e.g. accounts receivable, other financial assets) and projected cash flows from operations.

Pension plan risk: the company has closed all existing defined benefit pension schemes to new entrants. However, DNV GL is exposed to volatility in the financial markets affecting the value of the pension plan assets. The Group is also exposed to interest rate volatility affecting the pension commitments. Lower interest rates over the past years have led to an increase in the pension commitments.

Political risk: compliance with applicable trade sanctions is monitored at business area and Group level. This risk is considered to be limited.

Climate risk: international concern about the climate emergency has moved up the agenda. Addressing these concerns is a major driver of the energy transition which will affect both DNV GL and its customers. DNV GL conducts significant research into this, which is fed into our strategy development.

Corporate Governance

DNV GL considers sound corporate governance to be fundamental for securing trust in the company and a cornerstone for achieving sustainable value creation in the best interests of DNV GL’s customers, employees, owner and other stakeholders.

DNV GL issues an annual Corporate Governance Report to verify corporate governance in accordance with the Norwegian Code of Practice for Corporate Governance (“Code of Practice”) to the extent relevant for the DNV GL Group as a private limited company. DNV GL’s Corporate Governance Report deals with each of the 15 topics covered by the Code of Practice and describes DNV GL’s adherence to the Code of Practice. The Corporate Governance Report also describes the legal basis and principles for DNV GL's corporate governance structure.

The management company of the DNV GL companies is DNV GL Group AS, registered in Norway and governed by the Norwegian Private Limited Liability Companies Act. DNV GL Group is owned 100% by Det Norske Veritas Holding AS (“DNV Holding”). DNV Holding is a private limited company registered in Norway and is fully owned by Stiftelsen Det Norske Veritas. Stiftelsen Det Norske Veritas issues a separate annual corporate governance report available on The Board of Directors of DNV GL Group AS consists of ten Board members. Six of these are elected by the shareholders while four are elected by and from among DNV GL employees worldwide. The Board consists of six men and four women from four nationalities, with an average age of 58.2 years. The Board’s combined expertise represents a range of stakeholders, markets and competences.

In June 2019, Morten Ulstein, Lasse Kristoffersen, Birgit Aagaard-Svendsen and Silvija Seres were up for re-election. Morten Ulstein was replaced as Vice-Chairman of the Board by Jon Fredrik Baksaas, while Lasse Kristoffersen, Birgit Aagaard-Svendsen and Silvija Seres were re-elected.

Of the Board members elected by and from among the employees, Clemens Keuer was re-elected by the constituency “Europe (except Norway)” and David McKay was elected to replace Tian Da Wei as a Board member representing the constituency “Worldwide (except Europe)”.

Because of the changes in corporate governance that were decided on by the Board in June 2018, the position of Observer to the Board, held by Nikolaos Papanikos, was discontinued as from 31 July 2019.

The Board sincerely thanks Tian Da Wei, Nikolaos Papanikos and Morten Ulstein for their contributions as Board members of the company.

The Board held six ordinary Board meetings and five extraordinary meetings in 2019. The average attendance at these Board meetings was close to 100%. The Board’s Audit Committee held four ordinary meetings in 2019 and the attendance at these was 100%. The Board’s Compensation Committee held three ordinary meetings in 2019 and the attendance at these was 100%.

Further information related to DNV GL's corporate governance can be found in the company’s Corporate Governance Report for 2019 published on the DNV GL website.

Corporate sustainability

DNV GL’s commitments to customers, employees and business partners are guided by DNV GL’s purpose of safeguarding life, property and the environment.

DNV GL pursues continuous improvement in its sustainability performance and its management systems are certified to the ISO 9001, ISO 14001 and OHSAS 18001 standards.

DNV GL has been a signatory to the United Nations Global Compact since 2003, and the Board sees the integration of the ten principles on human rights, labour standards, environmental performance and anti-corruption as critical for achieving long-term value.

In 2019, DNV GL continued its partnerships with the World Business Council for Sustainable Development, the Red Cross and the UN Global Compact.

DNV GL supports the UN Sustainable Development Goals and aims to use this framework to create customer value through meeting societal needs. The Board considers the UN Sustainable Development Goals to be a framework for strengthening the company’s market positions. DNV GL provides strong business solutions for many of these global goals, including 7) Affordable and Clean Energy, 9) Industry, Innovation and Infrastructure, and 13) Climate Action. The Group strategy also reflects relevant market opportunities for the goals 3) Good Health and Well-being, 12) Responsible Consumption and Production, and 14) Life below Water.

DNV GL reports in accordance with the core level GRI Standards. KPMG has conducted limited assurance of the sustainability reporting on material topics. A global brand survey conducted in 2018 sought to identify the factors that stakeholders value when selecting assurance and advisory services. The replies were used to guide the priorities for reporting in 2019 and onwards.

The Board refers to the Annual Report for a complete account of corporate sustainability, including information on the priorities, management approach, targets and performance within the topics of: sustainable leadership; health and safety; business ethics and anti-corruption; people, environment and climate; sustainable procurement; and partnerships for sustainability. The Board’s audit committee has reviewed DNV GL’s sustainability reporting, including recommendations made by KPMG.

Organization and people

The DNV GL Group has employees in close to 80 countries and headquarters located at Høvik, just outside Oslo, Norway. DNV GL is organized in a group structure with five business areas: Maritime, Oil & Gas, Energy, Business Assurance, and Digital Solutions. An Independent Business Unit for Inspection was established and became operational on 1 January 2020. Common support is provided through a global support organization – Global Shared Services.

The total number of employees at year-end 2019 was 11,832, of whom 98.4% are permanent employees.

In addition, 9,069 qualified subcontractors and expert personnel were engaged throughout the year. Employee turnover was 8.8%, with voluntary turnover at 6.5%. The decline in the number of employees over the past year is mainly the result of the divestment of KEMA Laboratories.

DNV GL strives for diversity at all levels of the organization and is firmly committed to providing equal opportunity in all aspects of employment. A career in DNV GL should not be hindered by nationality, gender or age if the employee has the competence, attitude and values needed for the role. The Board considers the company’s purpose, vision and values to be instrumental in attracting and retaining a diverse workforce necessary in global markets. The Board also emphasizes the importance of sound management of human and labour rights. The DNV GL statement pursuant to the UK Modern Slavery Act is signed by the Board and published on the company website.

The employees represent 116 nationalities, and DNV GL has 100 or more employees in 20 countries. The largest DNV GL operations are in Norway, US, Germany, the UK and China.

Of the permanent employees, 86.5% have a higher education. The proportion of female employees is 33% and the proportion of female managers is 27%.

As of 31 December 2019, the Executive Committee consists of 3 women and 7 men.

Health and safety

The journey towards being the safest place to work continues – focusing on the resilience of its people. DNV GL’s vision is zero harm to, and a healthy working environment for, its workforce. To achieve this goal, the company continued to empower its people to make the right decisions about their own safety, health and wellbeing every day. No work is so urgent or important that employees cannot do it in a safe and healthy way. DNV GL addresses safety and health with both immediate and more long-term initiatives. DNV GL cares about its people in tangible ways and equips them with a stronger ability to embrace change and deliver results in a sustainable manner. DNV GL is continuously looking for ways to improve the health of employees and encourage a healthy lifestyle. To support this, global medical health check-up requirements have been implemented and an improved resilience framework has been re-launched. In addition, a resilience index has been developed to measure progress and for managers to follow up.

The company’s main occupational health and safety risks are related to slips, trips and falls, field work, driving and stress due to a high workload.

The long-term trend in the number of injuries and occupational diseases has been stable for the last couple of years, with a slight improvement in the injury and absentee rates in 2019 compared with 2018. The number of workdays lost among employees increased in 2019 compared to 2018. The increase in reported hours lost mainly relates to stress and a high workload. More details are provided in the health and safety section of the annual report.

Employee health and safety performance is reviewed by the Board twice a year and part of the CEO report for every Board meeting. DNV GL’s health and safety performance is on par with industry benchmarks, and a programme is in place to continuously strengthen the resilience of our employees and foster a learning health and safety culture.

Business ethics and anti-corruption

DNV GL’s business model and success are based upon trust at all levels and in all business environments. Building trust is enshrined in the company’s values and new vision. The Board emphasizes the necessity of reflecting DNV GL values and demonstrating ethical leadership in society.

The DNV GL group has a zero-tolerance policy for corruption and unethical behaviour that applies to all employees, subcontractors, agents and suppliers. DNV GL’s compliance programme and related instructions are based on the Code of Conduct for which the Board is responsible.

The Code of Conduct covers anti-corruption, antitrust, export controls, sanctions and personal data protection, and processes to handle cases are in place. Information on how to report occurrences or suspicions of misconduct is published on the company website and the intranet, and a mandatory e-learning module on the reporting of misconduct is available to all employees. There is also an ethical helpline and anonymous whistleblowing channel.

Compliance risks are regularly assessed as part of the corporate risk management process and measures are taken accordingly.

The Group Compliance Officer reports on performance to the Board’s Audit Committee quarterly, as well as to the Executive Committee when relevant.

In 2019, 67 (62) potential compliance cases were reported and handled. There was no legal action regarding anti-competitive behaviour or violations of antitrust or monopoly legislation in which DNV GL was identified as a participant during the reporting period. No significant fines or non-monetary sanctions or non-compliance with laws and/or regulations in the environmental, social or economic areas were identified.

Measures implemented in 2019 to sustain a high level of integrity include training, communication and updates to governing documents following statutory amendments. The company performed compliance reviews in countries identified for special anti-corruption and fraud measures. A training course for suppliers in all business areas were made available, and improvements were made to export control law handling. Around 800 employees received individual training on compliance programme topics.

Environment and climate

Safeguarding the environment is part of DNV GL’s purpose. The company is committed to take a precautionary approach, managing and continually improving its environmental and climate performance. Assessments, improvement actions, incident reporting and performance monitoring of material topics such as energy consumption, emissions to air and waste management are followed up annually. Internal and external audits are undertaken to assure performance. DNV GL is certified to ISO 14001 and this is monitored continuously across all locations. Performance is reported to the Board twice a year.

Climate change mitigation and adaptation initiatives are prioritized by DNV GL. DNV GL was verified as carbon neutral in relation to office buildings, laboratories and travel activity also in 2019. A new environment and climate strategy has been outlined which will include further carbon reduction initiatives, measurable goals and a clear direction for how operations are to be managed. The Board is monitoring the implementation of the strategy to ensure that DNV GL continues to set ambitious targets and reduce the environmental impact of its operations.

DNV GL prefers suppliers and subcontractors that provide services in compliance with the Group’s environmental and climate policies.

In 2019, zero cases of non-compliance with environmental regulations and zero fines related to environmental aspects were registered.

For further details about DNV GL’s environmental and climate performance, please see the sustainability section of DNV GL’s annual report.


Late in 2019 the world economy slowed, with weakened trade, manufacturing and investments. The IMF cut the GDP growth forecast.

The coronavirus (COVID-19) outbreak has already brought considerable human suffering and major economic disruption. Growth prospects for 2020 and 2021 are therefore highly uncertain. Risk aversion has increased in the financial markets, with interest rates falling to record low levels and equity prices declining sharply, commodity prices have dropped, and business and consumer confidence have turned downwards.

Relative to other pandemic in modern times, such as the SARS outbreak in 2003, the global economy has become substantially more interconnected, and China plays a far greater role in global output, trade, tourism and commodity markets. This magnifies the economic spillovers from an adverse shock in one region to all other countries. Even if the peak of the outbreak proves short-lived, with a gradual recovery in output and demand it will still exert a substantial drag on global growth in 2020.

Provided the effects of the COVID-19 virus outbreak fade, the impact on confidence and incomes of well-targeted policy actions in the most exposed economies could help global GDP growth to recover in 2021. However, there is a downside risk in that the impact of the COVID-19 virus proves longer lasting and more intensive than assumed in the present projections, possibly with second and third waves of the pandemic.

The COVID-19 virus outbreak is in an early state, and ahead we already see significant business impact for DNV GL. The situation is monitored closely and the impact on employees, customers and business will be assessed continuously and necessary mitigations will be implemented as required.

DNV GL has an ambitious program of digital transformation and using these digital tools and processes will be critical in the new business environment. The effects of the cost restructuring and productivity initiatives implemented across all business areas and in the shared services organization the past four years have contributed to improved performance and positioned DNV GL to better deal with the prevailing market conditions.

The trade tensions between China and the US will be a decisive factor for future economic development, including world trade. The signing of the “Phase 1” trade agreement in January 2020 reduces and stabilizes the tension in the US-China trade relations.

Europe has a relatively open economy and is therefore very exposed to global trade developments. The political uncertainty in Europe related to Brexit and Europe’s relatively weak ability to implement social reform programmes may have a negative influence on the global economy.

The strong political wind blowing in the direction of ambitious climate transition targets enforced by further regulation will continue, and all markets and industries will search for solutions to the climate- and environment-related challenges - which many companies see as business opportunities.

For 2020, a fall in seaborne trade and a higher level of scrapping, is expected. The IMO 2020 global sulphur cap requirements led to a peak in retrofit and conversion projects in 2019 and will continue to have some impact in 2020. The consequences of the COVID-19 virus, political risks in major economies, trade wars and sanctions will contribute to increased volatility in the market. Competition continues to be fierce, but DNV GL has managed to maintain its market share in the newbuilding market. The global ship newbuilding market has stabilized at a 40-50 million GRT level, and we expect this to continue into 2020. The company aims to win 25% of global newbuilding contracts measured in gross tonnes and will work to attract new tonnage from targeted customers and minimize the transfer of DNV GL classed ships to other classification societies.

In the oil and gas market, oil prices are highly volatile. The oil producing countries have not been able to reduce production to the level of oil demand and the oil prices are record low. Trade tensions and unrest in the Middle East region add to the volatility. The trade war is also limiting the important LNG expansion in the US. Offshore oil and gas developments will focus on less capital-intensive projects with a shorter payback time. The existing infrastructure across the value chain, including pipelines and refineries, will continue to demand operations support services. The oil & gas industry is being challenged to set ambitious targets for reduced emissions from its production and to engage in making end-products cleaner. 2020 will be a difficult year for DNV GL’s oil and gas customers and we foresee a very demanding year for DNV GL’s services to the oil & gas industry.

The trend towards decarbonization of the world’s energy systems strengthened in 2019, leading to a demand for renewable energy, power grid and storage services. The energy transition, with planned grid integration and an increased transition to renewable energy sources, is expected to continue in many countries. Energy efficiency will continue to be high on the agenda, particularly in the US and Middle East. The successful divestment of the KEMA Laboratory business has contributed to a more focused strategy for our energy services, and a better position for further investments in our core areas.

After the extraordinary growth achieved by DNV GL management system certification services in 2018, driven by the implementation of new ISO standards, 2019 was a year of stabilization. We expect 2020 to be a good year for our management system services, however, executing the order book will be challenging given the COVID-19 lock down in many countries. The underlying demand for product assurance, supply chain assurance and digital assurance is strong and is expected to create new business opportunities post COVID-19. DNV GL will continue to strengthen its industry position within the food & beverage, healthcare, automotive and aerospace sectors.

The revenue from DNV GL’s portfolio of software products and other digital services grew in 2019, and pre COVID-19 this trend was expected to be maintained in 2020 based on the upgrade of several applications and continued move towards a software-as-a-service platform. The Veracity platform will continue to be developed, with increased attention to the maritime and energy markets, the creation of digital wallet functionality and an increase in the number of registered users to benefit from network effects and drive scale.

The Board believes that DNV GL’s performance in 2019 demonstrates that the company has responded well to the challenges posed throughout the year and is entering the next decade more robust than ever. The company will continue to develop its broad competence and resource base to provide guidance and support to customers in a business environment where trust is at a premium and where the need for technical expertise and risk management will be in increasing in demand to tackle the extraordinary situation the world currently faces and the global transformations ahead.