Financing risks

The most significant financing risks in the Group’s international business operations are default risks and currency risks related to counterparties. The Group is also exposed to liquidity, refinancing, interest rate and price risks. Termination of many contracts with Russian customers has put pressure on the company’s short-term working capital financing. 

The default risk relating to customers’ solvency is managed through payment terms and by covering the unpaid sum with bank guarantees, letters of credit or other suitable securities. The Group’s liquid assets are mainly held in banks in its largest operational countries Finland and Canada. The credit losses recognized during the 2022 financial year amounted to EUR 2 thousand (EUR 0 thousand). 

The Group’s main currency is the euro. The most significant currency risks result from the following currencies: Chinese yuan (CNY), Canadian dollar (CAD), and US dollar (USD). The main hedging instruments used are foreign currency forward contracts. Currency clauses are included in quotations to hedge against currency risks during the quotation period. 

Depending on the case, currency risks related to preliminary sales contracts are hedged with currency option contracts. 

The Group has prepared for fluctuating working capital requirements and possible disturbances in the availability of liquid funds through credit facility agreements with two Nordic banks. On March 6, 2023, the parent company has signed an agreement with their main banks about renewing and replacing their current credit limit agreements and on determining the company’s new credit limits. 

The financing risks, as well as the risk management objectives and procedures, are described in more detail on page 50 of the notes to the financial statements.