Business risks and uncertainties

Economic cycles, legislation or other regulation and political environment 

Changes in the global economy and financial markets may have a negative impact on Raute’s operations, performance, financial position and sources of capital.

Raute is subject to geopolitical and macroeconomic conditions, where significant cost fluctuations and increasing interest rates may give cause to economic downturn. Such a downturn would likely impact Raute’s operations and reduce underlying demand.

The most important short-term risk relates to the implementation of the new company-wide ERP-system, which has a direct impact on Raute’s daily operations and financial management. Delays in implementation and roll-out of the system or possible challenges in migrating data to new ERP systems could result in significant cost overruns for the ERP system implementation, as well as disruptions in the customer delivery projects, also resulting in deteriorating customer relationship.
Raute’s business and products can be affected directly or indirectly by legislation or other regulation such as sanctions. It is also possible that Raute is susceptible to litigation. Raute continues to have risks related to exposure to Russian customers. The controlled wind-down of the remaining order book has progressed well during H1, however the remaining order book is still vulnerable to changes in regulation, sanctions, financial transactions and customers’ ability to conclude the contracts. The changing sanctions result in uncertainty in our ability to operate in line with our contracts and recognize revenue from our order book in progress. A material part of Raute’s technology and services has fallen under the scope of the sanctions.

Operations, deliveries and technology 

The bulk of Raute’s business operations consists of project deliveries, which expose the company to risks caused by customer-specific customized solutions related to each customer’s end product, production methods or raw materials. At the quotation and negotiation phase, the company takes risk relating to the promised performance and estimates of implementation costs. Other significant short-term risks for Raute are related to the price inflation and availability of raw materials, components and freight.

Raute’s investments in product development for new technologies are significant and involve the risk that the project will not lead to a technologically or commercially acceptable solution. 

Raute is executing a development program to improve end-to-end operational competitiveness and profitability and the aim is to achieve annual savings of some EUR 4–5 million by the end of 2023. The company is exposed to the risk of capturing the savings within the planned timeline.

Raute has announced a new strategy and related financial targets that aim for significant growth and profitability improvement over the coming five-year period. The company faces a risk that the strategy execution is not successful within the set timeline or that the set targets cannot be met.

The most significant financing risks in the Group’s business operations are default risks and currency risks related to counterparties. The Group is also exposed to liquidity, refinancing, interest rate and price risks. 

Human resources 

Competence retention and development and ensuring the sufficiency of human resources are particularly important in cyclical business. Continuity is ensured by monitoring the development of the age structure, implementing systematic human resources management and investing in well-being at work. Despite the human resources work and processes, Raute is exposed to risk of losing key personnel, and difficulties in hiring new talent to address new business challenges. 

Cyber and information security, payment fraud 

Raute’s operations are dependent on the security and stable operation of its information and communication systems and software. Additionally, a successful management of cyber-attack risks is important. These risks are managed according to a defined information security policy. 

Raute is repeatedly exposed to the risk of payment fraud. The company faces the risk of a fraud attempt bypassing the payment transaction control points and damaging the company financially. 

The reputation of the company 

Raute is at risk of being part of a business chain that involves corruption, bribery or money laundering without its knowledge, even though it regularly inspects its business partners with respect to, for example, international sanction lists and export restrictions. The realization of these risks may result in legal consequences, and the company’s reputation and financial position may suffer.

It is possible that players who do not respect Raute’s principles related to human rights or the basic rights of employees operate in the international supply chain. Such cases may damage the company’s reputation and interrupt the supply chain if the infraction is severe enough to warrant an end to the co-operation.