Business risks

Impact of economic cycles on business operations
Raute’s business operations are characterized by the sensitivity of investment demand to fluctuations in the global economy and the financing markets, and the cyclical nature of investment commodities’ project business. The impact of changes in demand on the Group’s result is reduced by increasing the share of technology services, increasing operations in market areas with a small current market share, developing products for customer segments in which the Group has a weaker market position, and developing the partner network.

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 has to take risks relating to the promised performance figures and make estimates of implementation costs.

Raute invests heavily in product development. The developmental phase for new technologies involves the risk that the project will not lead to a technologically or commercially acceptable solution. The functionality and capacity of new solutions produced as a result of development work cannot be fully verified until the solutions can be tested under production conditions in conjunction with the first customer deliveries.

Contract, product liability, implementation, cost and capacity risks are managed using project management procedures that comply with the company’s ISO-certified quality system. Technology risks are reduced by the conditions of delivery contracts and by restricting the number of simultaneous first deliveries.

Emerging markets
Raute’s objective is to increase its local business, for example, in China and Russia, where, besides opportunities, companies face risks typical to emerging markets.

The company’s reputation
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.

Payment fraud
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.

Information security
Information security risks are managed according to a defined information security policy.

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.