Risks and risk management
BUSINESS RISKS AND THEIR MANAGEMENT
Risk management
Risk management is a part of Olvi Group’s everyday management and operations. Our objective is to ensure the realisation of the strategy, as well as secure financial development and the continuity of business. Group has a risk management policy and risk management guidelines defining the policy in more detail. These are used Group-wide to define the purpose, contents, governance model and roles of risk management and provide guidelines for the practical process in accordance with an annual schedule.
The objective of risk management is to develop the organisation’s risk awareness and a proactive way of managing risks, increase opportunities and decrease threats to the achievement of business advantages, ensure a sufficient risk management operating model throughout the organisation and manage risks as an integrated part of business operations, planning and decision-making.
Geopolitical situation
The geopolitical situation has affected Olvi’s operating environment. The war in Ukraine has significantly increased business risks. The coronavirus pandemic caused problems in the availability of raw materials and packaging materials, and the war in Ukraine has further complicated the procurement of materials. The increase in the costs of packaging materials, which started during the pandemic and continued in 2023, levelled out as a whole in early 2024 compared with the previous year. However, the costs of some production batches continued to increase at the beginning of 2024. In addition, the prices of raw materials, especially barley malt, sugar and carbon dioxide, continue to be at a historically high level. Uncertainty in prices and availability has continued in the market because of the war and weather events caused by climate change. The considerable fluctuations in energy prices continue. Logistics costs remain at a high level because of rising fuel prices. Olvi is responding to the increase in costs by improving operational productivity and assessing the adequacy of sales prices to maintain profitability.
Consumer behaviour
Despite the recent easing of the overall cost level, high consumer prices continue to weaken consumers’ purchasing power and affect consumer behaviour. This change can already be seen as a shift in consumption towards cheaper product options. In addition, overall consumption can decrease, and the premiumisation trend may stop. There are differences between markets. Olvi Group is responding to the change by developing its product portfolio in line with consumer demand and by maintaining and strengthening market shares.
Operating environment in Belarus
The business operations and financial forecasting in Belarus continue to involve considerable uncertainty. For example, the uncertainty concerns the development of exchange rates, the unpredictability of the operating environment, local legislation and taxation, trade sanctions, and the functioning of financial transactions with Western countries. Olvi’s Belarusian subsidiary operates by means of its own cash flow financing. Cash and cash equivalents stood at EUR 8.8 million at the end of the review period. Despite the amendments made to the legislation preventing the sale of foreign-owned companies in Belarus in 2024, the prohibition of selling shares in Olvi’s subsidiary remains in force, and Olvi does not have permission to sell shares.
Other current risks
As political strikes continue in Finland, Olvi may suffer significant financial losses. These financial risks are related to the functionality of production and the supply chain in particular, as well as to customers’ ability to operate. Significant direct costs have been avoided so far.
Cybersecurity threats have increased because of the escalation of the global geopolitical situation, among other reasons. Olvi Group has prepared for the increasing information security threats in many ways. Personnel are provided with training, information about threats is provided regularly, and cybersecurity guidelines are reviewed during induction training. Olvi’s information systems are protected through regular updates, backups, firewalls, anti-malware software, content filters and threat detection programs.
If the EU Packaging and Packaging Waste Regulation were to be implemented using the model now proposed, it would create needs for Olvi to invest in the filling and handling of products and would increase climate emissions from product manufacturing and logistics.
Our operations involve several risks related to sustainability. The identification and assessment of and preparation for these risks have become a significant part of risk management. We have identified these as part of strategic, business, financial and compliance risks. Sustainability risks are identified in connection with several different risk assessments, such as human rights and climate change assessments.
Preparedness
Olvi Group has prepared several scenarios related to the development of the business environment and is prepared to respond to changing situations. The company is prepared for production disruptions and has drawn up continuity plans related to the availability of labour, raw materials and energy, for example. The company has made investments to secure energy supply and has also made efforts to ensure the availability of raw materials and packaging materials. Particular attention has been paid to the adequacy of risk management plans in accordance with risk assessments and the introduction of new risk assessment methods in terms of information and sustainability risks, for example. The separation of the Belarusian operations from the Group has been carried out with determination, and the company has prepared for the uncertainties mentioned above based on various scenarios.
A more detailed description of the normal risks related to business operations is provided in Olvi Group’s Board of Directors’ report and the notes to the financial statements and on the company website (Investors > Olvi as an investment > Risks and risk management).