Risk and risk management
The risk factors considered to be of importance in relation to Electrolux Professional are for example risks related to Electrolux Professional’s operations and industry, legal risks and financial risk. The risk factors currently deemed material to Electrolux Professional are described below. The risk factors’ materiality has been assessed based on the probability of their occurrence and the expected magnitude of their negative outcome.
Risks related to the outbreak of the coronavirus
Due to the big outbreak of corona in northern Italy, where Electrolux Professional’s operational headquarter, including a large part of the Group’s management, manufacturing units and a logistics hub, is located, there is a risk that the coronavirus could have a significant adverse effect on the Group’s operations, manufacturing and distribution capacity.
Macroeconomic factors and geopolitical conditions
Demand for Electrolux Professional’s products depends on the general economic climate within the professional equipment industry.
Risks relating to the manufacturing units
Electrolux Professional has twelve manufacturing units in seven countries and the manufacturing comprises a chain of processes in which extensive outages and disruptions would adversely affect Electrolux Professional’s possibilities to perform its obligations to customers.
Risks related to raw materials, components and commodities
Changes in commodity prices, energy prices tariffs and other measures restricting trade that encompass raw materials or components that Electrolux Professional uses in its production affect its results of operations. Shortages in the supply of raw materials or electricity would adversely affect Electrolux Professional’s ability to manufacture its products.
Electrolux Professional operates in a competitive industry characterized by evolving industry standards and continuous improvements in performance characteristics and product features. Increased competition may lead to lower prices or reduction in orders by volume or revenues.
Electrolux Professional’s global operations expose the Group to risks related to human rights, employment conditions and corruption. Breaches of, or non-compliance with, applicable laws and regulations would adversely affect Electrolux Professional’s business and reputation.
Electrolux Professional’s manufacturing is subject to numerous international, national and local environmental, health and safety directives, laws and regulations, including those pertaining to the storage, handling, treatment, transportation and disposal of hazardous and toxic materials, the construction and operation of plants and standards relating to energy efficiency and the discharge of pollutants to air, soil and water. Any severe non-compliance or disputes risk resulting in the imposition of fines, penalties or liens, or give rise to civil or criminal liability.
Risks related to legal disputes and administrative proceedings
Electrolux Professional is involved in disputes in the ordinary course of its business. The disputes may concern, among other things, alleged defects in delivery of goods and services, warranty undertakings, supplier agreements, employment issues, patent rights and other intellectual property rights and other issues on rights and obligations that arise in connection with the Group’s operations. The financial, reputational and legal outcomes of material disputes are uncertain and presents a highly significant risk.
Electrolux Professional’s solutions and products are manufactured in twelve facilities located in seven countries around the world and sold in approximately 110 countries. Extensive currency exchange movements present a significant risk to Electrolux Professional.
Liquidity and financing risks
Electrolux Professional may be unable to meet payment obligations because it has insufficient cash at its disposal, or may risk that the financing of the Group’s capital requirements and refinancing of existing borrowings is more difficult or costly in the future.
Credit risk on financial transactions is the risk that the counterpart is not able to fulfil its contractual obligations related to the Group’s investments of liquid funds and derivatives. Credit risks also arise in connection with trade receivables.