NORMA Group is exposed to a wide variety of risks and opportunities that can have a positive or negative short-term or long-term impact on its earnings, assets and financial position. For this reason, opportunity and risk management represents an integral component of corporate management for NORMA Group, at both the Group management level and at the level of the individual companies and functional areas. Due to the fact that all of the company’s activities are associated with risks and opportunities, NORMA Group considers identifying, assessing, and managing opportunities and risks to be a fundamental component of executing its strategy, securing the short and long-term success of the company and sustainably increasing shareholder value. In order to achieve this over the long term, NORMA Group encourages its employees in all areas of the company to remain conscious of risks and opportunities.

Risk and opportunity management system

NORMA Group defines opportunities and risks as possible future developments or events that could have a positive or negative impact on the Group’s forecasts or targets. The focus with regard to possible deviations is on a period of three years for concrete opportunities and risks. Opportunities and risks that could have an impact on the company’s success beyond this period of time are recorded and managed at the Group management level and taken into consideration in the corporate strategy. The assessment of the individual opportunity and risk categories takes a period of up to three years into account, unless a different period is specified in the individual categories. NORMA Group assesses the opportunities and risks it identifies using systematic evaluation procedures and quantifies them in terms of both their financial impact – i.e. gross and net impact on the planned earnings figures – and their probability of occurrence. Opportunities are thus considered and documented in a process that is separate from NORMA Group’s risk management system.

The Management Board of NORMA Group is responsible for maintaining an effective risk and opportunity management system. The Supervisory Board is responsible for monitoring the effectiveness of the Group’s risk management system. Compliance with the Group’s risk management policy in the individual companies and functional areas is subject to the internal audit department’s periodic reviews.

Revision of the risk management system in fiscal year 2021

Taking the revised regulatory requirements of the “Auditing Standard 340 new version” of the Institute of Public Auditors in Germany (IDW PS 340 new version) into account, the risk management system at NORMA Group was gradually improved in fiscal year 2021. In particular, the following core aspects were revised or implemented in the process:

  • Introduction of a new software solution as a basis for the further system-supported integration of the risk management system into all organizational levels of NORMA Group as well as for the mapping of regulatory requirements (in particular in order to determine a statistically valid overall risk position)
  • Revision of the regulations on the risk management system as well as the structural and process organization to increase the efficiency of risk management processes
  • Strengthening of functional responsibilities at Group level to ensure homogeneous risk management throughout the Group in the regions and segments of NORMA Group
  • Further development of the risk catalog to be applied Group-wide derived from NORMA Group’s risk profile
  • Optimization of the assessment methodology of risks, including scaling of the assessment classes of the risk matrix to prioritize risks as well as a focus on an assessment period of three years
  • Assessment of risks with regard to potential liquidity effects in addition to the previous focus on earnings effects
  • Assessment of the statistically valid overall risk position and, based on this, assessment and monitoring of NORMA Group’s risk-bearing capacity at Group level
  • Realignment and revision of the training concept for the further developed risk management system of NORMA Group as well as its Group-wide implementation in fiscal year 2021

Due to the revision of the risk management process in fiscal year 2021, the approach to assessing and presenting opportunities and risks has changed in part. This means that it can only be compared to the previous year to a limited extent.

Risk management process

The risk management process at NORMA Group includes the core elements of risk identification, risk assessment and controlling and monitoring risks and is coordinated by the Risk Management department at Group level. The risk management process is fully depicted in an integrated software solution. The risk managers at all organizational levels of NORMA Group record the risks that are identified and assessed in this software. For all risks, a review and approval of the respective risks is carried out by the risk or functional managers at Group level. The process of identifying, evaluating and controlling risks is accompanied by continuous monitoring and communication of the reported risks by the respective risk managers.

Risk identification is carried out bottom-up by the individual companies as well as top-down by the individuals responsible for functions at the regional and Group levels. Various methods that correspond to the structure of the organization are used to identify risks. Such methods include interdisciplinary workshops, interviews and checklists, but also market and competitive analyses. In certain cases, analyses of the process workflows as well as results from internal and external audit reports are used. NORMA Group’s risk managers are responsible for verifying on a regular basis whether all material risks have been recorded.

As part of the risk assessment process, the risks identified are evaluated using systematic assessment procedures and quantified in terms of both their financial impact (on earnings and liquidity) and their probability of occurrence. This involves recording those risks that can be specified and substantiated and that exceed a defined threshold in terms of the potential amount of damage. Risks are generally assessed taking possible scenarios into account in order to be able to present a risk assessment that is as realistic as possible.

As part of risk controlling, the appropriate risk mitigating measures are developed and implemented, and their implementation is monitored. These include, in particular, strategies to avoid, reduce and hedge against risks. Risks are managed in accordance with the principles of the risk management system as described in the Group risk management policy.

Risk reporting

Group-wide recording and assessment of risks as well as their reporting to the functional managers and individual companies by functional areas, the management of the segments, the Management Board and the Supervisory Board take place on a quarterly basis. In addition, risks that are identified within a quarter and whose expected value could have a significant impact on the results of the Group are reported ad hoc to the Management Board and, if necessary, to the Supervisory Board.

In order to analyze NORMA Group’s overall risk situation and initiate appropriate countermeasures, all recorded and assessed risks are aggregated into a risk portfolio. For this purpose, statistically reliable methods are applied in the newly implemented risk management software. Here, the scope of consolidation for risk management corresponds to the scope of consolidation in the Consolidated Financial Statements. In this context, the overall risk position determined in relation to NORMA Group’s risk-bearing capacity for the period under review is monitored regularly by the Management Board for developments that could potentially jeopardize the company’s continued existence. In addition, NORMA Group categorizes risks according to type and the functional area they affect. This makes it possible to aggregate individual risks into risk groups in a structured manner. This aggregation enables NORMA Group to identify and manage not only individual risks, but also trends, and thus sustainably influence and reduce the risk factors with certain types of risks. If not indicated otherwise, the risk assessment applies for all regional segments.

Opportunity management process

Operational opportunities are identified, documented and analyzed in monthly meetings at the local and regional level and by the Management Board. In addition, measures aimed at capitalizing on strategic and operational opportunities through local and regional projects are approved at these meetings. The identification and success of the implementation of potential opportunities are tracked and reviewed by producing regular forecasts as part of periodic reporting. Strategic opportunities are recorded and evaluated as part of annual planning. Significant opportunities are presented in NORMA Group’s Annual Report after the fiscal year has ended.

Internal control and risk management system with regard to the Group accounting process

NORMA Group’s internal control and risk management system with regard to the Group accounting process can be described as follows. The system is geared towards identifying, analyzing, assessing and managing risks as well as monitoring these activities. The Management Board is responsible for ensuring that this system meets the company’s specific requirements. Based on the allocation of responsibilities within the company, the CFO is responsible for the Finance and Accounting divisions. These functional areas define and review the Group-wide accounting standards within the Group and compile the information used to prepare the Consolidated Financial Statements. The need to provide accurate and complete information within predefined timeframes represents a significant risk for the accounting process. Because of this, requirements must be communicated clearly, and the respective units must be put in a position to meet these requirements.

Risks that could affect the accounting process arise, for example, from the late or incorrect entry of business transactions or non-compliance with accounting rules. The failure to enter business transactions also represents a potential risk. In order to avoid errors, the accounting process is based on the separation of duties and functions or responsibilities as well as plausibility checks as part of the reporting process. Both the preparation of the financial statements of the Group companies included in the Consolidated Financial Statements and the consolidation measures based on these are characterized by consistent observance of the “dual control principle.” Comprehensive and detailed checklists must be completed before the respective reporting deadlines. The accounting process is fully integrated into NORMA Group’s risk management system. This ensures that accounting risks are identified at an early stage and that measures to prevent and avert risks can be implemented without delay.

The internal control system ensures the accuracy of NORMA Group’s financial reporting with respect to its accounting process. The internal audit department reviews the accounting processes on a regular basis to ensure that the internal control and risk management system is effective. External specialists also support these efforts. Furthermore, the financial statement auditor conducts audit procedures of the annual financial statements during the audit based on the risk-based audit approach, whereby material misstatements and violations are to be uncovered with reasonable assurance.

The IFRS accounting standards as they are to be applied in the European Union are summarized in an accounting manual that includes an account assignment guideline (IFRS Accounting Manual). All companies in the Group must base their accounting processes on the standards described in the Accounting Manual. Important accounting and valuation standards, such as the recognition and measurement of fixed assets, inventories and receivables, as well as provisions and liabilities, are defined in a binding manner. Tax issues and responsibilities are regulated in a Group tax guideline. The Group also has system-supported reporting mechanisms to ensure that identical situations are handled in a uniform manner across the Group.

The Consolidated Financial Statements and Combined Management Report are prepared according to a uniform time schedule for all companies. Each company in the Group prepares its separate financial statements in accordance with the applicable local accounting guidelines and IFRS. Intra-Group deliveries and services are recorded in separately designated accounts by the Group companies. The net balances of Intra-Group offsetting accounts are reconciled on the basis of defined guidelines and schedules by means of balance confirmations. The companies in the Group use the COGNOS reporting system for financial reporting. In accordance with NORMA Group’s regional segmentation, technical responsibility for the financial area is shared by both the financial officers in the Group companies as well as by the regional CFO for the respective segment. They are responsible for the quality assurance of the financial statements of the respective Group companies. The comprehensive quality assurance of the financial statements of the Group companies included in the Consolidated Financial Statements is carried out by Group Accounting, Tax & Reporting, which is responsible for preparing the Consolidated Financial Statements. The preparation of the Combined Management Report is the responsibility of the Investor Relations department, which reports directly to the member of the Management Board of NORMA Group responsible for finance, the CFO. In addition, the data and disclosures of the Group companies as well as the consolidation measures necessary for the preparation of the Combined Financial Statements are verified through audit procedures conducted by external auditors under consideration of the associated risks.

The financial accounting systems used by the Group companies of NORMA Group are gradually being converted over to the Group standard Microsoft Dynamics 365. All systems have structured access authorizations. The local management decides on the type, design and allocation practices of the access authorizations in consultation with the central IT department.

Risk and opportunity profile of NORMA Group

As part of the preparation and monitoring of its risk and opportunities profile, NORMA Group assesses risks and opportunities based on their financial impact and their probability of occurrence. The financial impact of opportunities and risks is assessed in relation to EBITA, based on the effect on the Group’s earnings or liquidity. The following four categories (five categories in the previous year) are used to determine the potential maximum average annual impact in the period under review of the risk management system. The categories used in the previous year are shown in parentheses:

  • Low: up to EUR 5 million effect on earnings or liquidity (previous year: Insignificant - up to 1% of budgeted EBITA – or Minor – more than 1% and up to 5% of budgeted EBITA)
  • Moderate: more than EUR 5 million and up to EUR 15 million effect on earnings and or liquidity (previous year: more than 5% and up to 10% of budgeted EBITA)
  • Significant: more than EUR 15 million and up to EUR 30 million effect on earnings or liquidity (previous year: more than 10% and up to 25% of budgeted EBITA)
  • High: more than EUR 30 million effect on earnings or liquidity (previous year: more than 25% of budgeted EBITA)

The probability of individual risks and opportunities occurring is quantified based on the following four categories:

  • Unlikely: up to 5% probability of occurrence (previous year: Very unlikely – up to 3% probability of occurrence – or Unlikely – more than 3% and up to 10% probability of occurrence)
  • Possible: more than 10% and up to 25% probability of occurrence (previous year: more than 10% and up to 40% probability of occurrence)
  • Likely: more than 25% and up to 50% probability of occurrence (previous year: more than 40% and up to 80% probability of occurrence)
  • Very likely: more than 50% probability of occurrence (previous year: more than 80% probability of occurrence)

The main areas of risk and opportunity related to NORMA Group’s business model are described below. Unless stated otherwise, the risk and opportunity profile represents the assessment of the management of NORMA Group as of the reporting date December 31, 2021. The financial effects and probabilities of occurrence are presented as net effects, i.e. taking countermeasures already initiated into account. In addition to the overall assessment of the material risk areas, material individual risks identified within the risk areas are also presented. Material individual risks exist if the potential impact on NORMA Group’s earnings or liquidity – irrespective of the probability of occurrence – is assessed as exceeding EUR 10 million.

Financial risks and opportunities

NORMA Group is exposed to various financial risks, including default, liquidity and market risks. The Group’s financial risk management strategy concentrates on the identification, assessment and mitigation of risks, focusing on minimizing the potential negative impact on the company’s earnings, assets and financial position. Derivative financial instruments are also used to hedge certain risk items. Financial risk management is carried out by Group Treasury and Insurance (Group Treasury). Group management defines the areas of responsibility and necessary controls related to the risk management strategy. Group Treasury is responsible for identifying, assessing and hedging financial risks in close consultation with the Group’s operating units. In this context, various processes and organizational structures work together to measure and assess opportunities and risks on a regular basis and to initiate appropriate measures if necessary. Group Treasury regularly conducts analyses of default, interest rate, currency and liquidity risks. The results are then discussed internally, and actions are defined. Group Treasury also informs the senior managers of the relevant departments of significant risks in a committee that meets twice a month and discusses how to deal with these risks and their potential impact on NORMA Group. Notes

Capital risk management

NORMA Group’s objective when it comes to managing its capital is primarily the long-term servicing of its debts and remaining financially stable. In connection with a few of its long-term financing agreements (promissory note tranches from 2013 and 2014), NORMA Group is obliged to comply with the financial covenant Total Net Debt Cover (debt in relation to adjusted consolidated EBITDA). This key figure and compliance with it are monitored continuously, as are the amount of net debt and the maturity structure of financial debt. Changes in the value of the parameters included in this financial indicator are limited by employing long-term hedging strategies. Other financial covenants exist only as part of a syndicated bank loan negotiated in 2019 and are tested only in advance of possible M&A transactions without providing the creditor banks with grounds to terminate the loan.

Default risks

Default risks are risks that contractual partners of NORMA Group fail to meet their obligations arising from business activities and financial transactions. Due to the nature of the respective assets and business relationships as well as the soundness of its current banking partners, default risks with respect to deposits and other transactions concluded with credit and financial institutions currently do not represent a major risk category for NORMA Group. Nevertheless, the creditworthiness of the contract partners is continuously monitored and discussed at regular senior management meetings.

Relevant default risks can arise, however, with respect to business relationships with customers and relate to outstanding receivables and committed transactions. NORMA Group reviews the creditworthiness of new customers to minimize the risk of default on trade receivables. In addition, the company generally only supplies to customers whose creditworthiness does not meet the Group’s requirements or who have defaulted on payment if they pay in advance. In addition, a diversified customer portfolio reduces the financial repercussions of default risks. Despite the aforementioned measures, the probability of default risks occurring is assessed as likely, mainly because it is still not possible to fully assess the future impact of the global COVID-19 pandemic on potential insolvencies of individual customers. The potential financial effects of default risks are still judged to be insignificant considering the relevant factors, such as bad debt losses experienced in the past, and due to the countermeasures taken (previous year: “insignificant”).

Liquidity risks and opportunities

Prudent liquidity risk management requires holding sufficient cash funds or marketable securities, having sufficient financing from committed lines of credit and being able to close out market positions. Due to the dynamic nature of NORMA Group’s business, Group Treasury seeks to ensure flexibility in financing by keeping committed credit lines available. Therefore, NORMA Group’s primary objective is to ensure the uninterrupted solvency of all Group companies. Group Treasury is responsible for liquidity management and thus for minimizing liquidity risks. As of December 31, 2021, cash and cash equivalents amounted to EUR 185.7 million (2020: EUR 185.1 million). In addition, NORMA Group has a high level of financial flexibility thanks to a committed revolving credit line with national and international credit institutions in the amount of EUR 100 million. This committed credit line was increased by EUR 50 million to EUR 100 million in 2021 in order to further increase NORMA Group’s ability to take strategic action. As of December 31, 2021, the committed credit line has not been used. In addition, NORMA Group launched a commercial paper program with a total volume of EUR 300 million in 2019, which can be used flexibly to cover short-term liquidity requirements. These money market papers, which are equivalent to bearer bonds, are issued on a revolving basis for a short-term period of 1 to 52 weeks and thus allow for the Group’s own liquidity to be managed in line with requirements. As of December 31, 2021, the commercial paper program was used as a source of refinancing in a volume of EUR 65 million (2020: EUR 20 million).

NORMA Group sees financial opportunities, among other areas, in its high creditworthiness as well as its solid asset, financial and earnings positions, which will enable the company to gradually reduce its capital costs. Accordingly, the financing concluded in 2019 is characterized by an increase in the committed degrees of freedom and lower interest costs. This bank loan of EUR 250 million also includes a sustainability component linked to an external rating. Due to an improvement in its sustainability rating in the past fiscal year, NORMA Group was again able to reduce its external interest burden. Despite the economic impact of the COVID-19 pandemic, the liquidity-related opportunities are assessed as likely, in particular due to the stable business relationships with banking partners and the resulting reputation on the capital markets. In light of the refinancing measures carried out in the recent past, which have already significantly reduced borrowing costs, the potential financial impact of liquidity-related opportunities on NORMA Group’s earnings is assessed as only low. FINANCIAL POSITION

Currently, only a small share of the Group's financing agreements contain standard market credit conditions (financial covenants). If these were not complied with, the lending banks and investors would be entitled to reevaluate the contracts and/or demand higher credit margins. In light of the measures implemented in the past fiscal year, non-compliance with the financial covenants would now have a minor (previous year: “moderate”) financial impact. Irrespective of the scope of financial covenants, compliance with them is continuously monitored in order to be able to take appropriate measures at an early stage if necessary and to avoid any worsening of the conditions. NORMA Group uses rolling hedging transactions if necessary to hedge balance sheet items in foreign currencies whose valuation leads to fluctuations in the profit and loss account. Group Treasury ensures that sufficient liquidity or granted credit lines are available at all times to cover any possible cash outflows related to these hedging measures. This is continuously monitored by means of risk simulation and discussed in senior management meetings. The probability of liquidity risks having a negative impact on NORMA Group’s activities is considered unlikely due to the high financial flexibility provided by committed and not yet utilized bank credit lines. The risk that financial covenants will not be met is still considered unlikely due to the company’s high profitability and strong operating cash flow. In the event of (short-term) increased liquidity requirements that exceed currently negotiated lines, the possibilities of raising funds at market conditions, by issuing new bonds on the commercial paper capital market, for example, are considered to be very good.

Exchange rate developments

As an internationally operating company, NORMA Group is active in more than 100 countries and therefore exposed to foreign currency risks. The US dollar, British pound, Swiss franc, Chinese renminbi, Polish złoty, Swedish krona, Czech koruna, Singapore dollar, Indian rupee and Serbian dinar are considered to be the main risk-prone currency positions.

Foreign currency risks that cannot be offset against each other are hedged if necessary by using futures contracts. The high volatility of many major currencies and the particular influence of the US dollar on the Group’s earnings, assets and financial position represent a considerable risk that can only be hedged in part and only for a short period of time. In the medium term, NORMA Group will strive to counteract currency risk by increasingly producing locally. Production and logistics

Because the Group’s subsidiaries operate in key countries with currencies other than the euro, the Group has sufficient cash-in and cash-out capabilities to absorb short-term exchange rate fluctuations via targeted income and expenditure management. The syndicated bank loan refinanced in fiscal year 2019 has also increased its flexibility in managing foreign currencies. It provides for the utilization of credit lines in various currencies (e.g. US dollar and euro tranches). In addition, the US dollar promissory note tranches issued lead to a better congruence of the payment profiles in US dollars. The remaining foreign currency risks are continuously monitored in the Group and, in the event that risk limits are exceeded, transferred to the euro on a rolling basis using derivative hedging instruments. Translation risks are continuously monitored by Group Treasury. Nevertheless, items in the Statement of Financial Position and the Statement of Comprehensive Income of subsidiaries in foreign currency areas inevitably result in translation effects when they are translated into euros.

The potential financial effects of opportunities and risks related to exchange rate changes are considered to be low (previous year: “moderate”) based on the sensitivity analyses that have been performed. The probability of the incidence of these opportunities and risks is assessed as highly likely (previous year: “possible”) in light of recent exchange rate fluctuations and the uncertainties with regard to the further development of relevant exchange rates.

Changes in interest rates

Changes in global market interest rates affect future interest payments for variable interest liabilities and can therefore have an adverse effect on the Group’s earnings, assets and financial position. NORMA Group’s interest change risk arises in particular from long-term loans.

Some of the current loans have fixed interest rates and are therefore not subject to interest rate risk. Goals and strategies REGARDING financE and liquidity managementS

Loans that initially had variable interest rates were partly synthetically converted into fixed interest rate positions using derivative instruments. NORMA Group has hedged over 60% of its variable interest rate loans in USD valued at USD 112 million in total. The remaining USD floating rate loans are unsecured and continuously monitored by Group Treasury. On the other hand, variable rate loans denominated in euros in the amount of EUR 158 million are unhedged. Due to the Group’s internal interest rate expectations, this item is deliberately not hedged. In the event of an increase in interest rates, Group Treasury would limit the interest rate risk by using appropriate hedging measures.

Due to the fact that there are currently no signs of a more restrictive monetary policy in the eurozone, NORMA Group views the risk of interest rate increases in the short term to be unlikely and in the medium term as possible. In view of the current low interest rate level in the eurozone, the chances of a further interest rate cut are considered unlikely in the short and medium term. In the US dollar zone the probability of further interest rate cuts, which would lead to corresponding opportunities for NORMA Group, is also considered unlikely in both the short and medium term. NORMA Group regards the risk of rising US interest rates to be very likely. In light of the measures already implemented to optimize the financing structures, the financial effects associated with these risks and opportunities are assessed as low.

In summary, NORMA Group assesses the opportunities arising from changes in interest rates as unlikely (previous year: “possible”), whereas risks from changes in interest rates are assessed to be very likely (previous year: “possible”). The possible effects are classified as low in all scenarios.

Economic and cyclical risks and opportunities

NORMA Group's success largely depends on the macroeconomic trends on its sales markets and its customers’ sales markets. Therefore, important indicators of economic development worldwide are taken into account both in planning and in risk and opportunity management. In order to gauge the macroeconomic trend, NORMA Group relies, among other sources, on the forecasts of widely regarded institutions such as the IMF, the Bundesbank and reputable economic research institutes. According to the latest estimates, economic conditions are expected to continue to develop positively in 2022 with global growth of 4.4% following the growth of the global economy in the past fiscal year (+5.9%).

In the past fiscal year, economic development continued to be significantly impacted by the corona pandemic as well as direct and indirect global effects of the pandemic. Following a recovery in the first half of 2021, supply bottlenecks, cost increases and further waves of the corona pandemic in particular slowed the upswing in the second half of the year. For the current fiscal year as well, the further development of the corona pandemic, in particular the possible effects of further waves of the pandemic – and direct and indirect potential macroeconomic effects on the global value and transport chains associated with the pandemic – continue to be considered a significant risk factor and are assessed as a significant individual risk in the overall context of NORMA Group’s business activities. In particular, setbacks in the fight against the pandemic, due to resistant virus mutations, for example, persistent material shortages, rising inflation rates and a possible turnaround in interest rates in individual regions could have a significant negative impact on economic growth. Furthermore, geopolitical risks, such as military conflicts, and risks in connection with trade disputes, continue to be major negative factors for the development of the global economy. In particular, military activities as well as economic sanction measures in connection with the Russia/Ukraine crisis could have a negative impact on the global economy and - directly or indirectly - on NORMA Group's business activities, such as a reduction in sales in affected markets or a fundamental impact on global supply chains. NORMA Group does not operate any production or sales sites in Ukraine or Russia and the share of business with customers in Russia and Ukraine in NORMA Group's total sales is less than 1 percent. However, it is currently not possible to fully assess how the Russia/Ukraine crisis will affect the global economy and thus NORMA Group in the long term.

In assessing the possible macroeconomic consequences of these developments, NORMA Group comes to the conclusion that a negative development of the global economy compared to the planning assumptions is currently classified as possible, taking these risks into account. Should these factors lead to an impairment of global demand, the financial deviations compared to the planning are estimated to be moderate. A positive development of the global economy that extends beyond the planning assumptions would represent an opportunity for NORMA Group. The company considers it possible that the global economic situation and thus NORMA Group’s earnings will improve beyond the planning assumptions. In the overall view of the current macroeconomic climate and the prospects based on it, the potential financial impact of these opportunities is considered moderate, as in the previous year.

Industry-specific and technological risks and opportunities

Industry-specific and technological risks and opportunities for NORMA Group are closely linked to the conditions and developments in the respective customer industries. Products and end markets It should be borne in mind, however, that the customer industries in the regions relevant to NORMA Group, EMEA, the Americas and Asia-Pacific, have partly specific characteristics and challenges.

Business activities with OEMs for passenger cars and commercial vehicles as well as customers in the aftermarket segment continue to represent the most important end markets for NORMA Group in terms of sales. In this area, the increasingly strict emission standards worldwide and the growing use of more environmentally friendly drive technologies in particular represent a development that is associated with various opportunities and risks for NORMA Group. NORMA Group’s current product portfolio includes a wide variety of product solutions that help reduce emissions from passenger cars and commercial vehicles with combustion engines, including hybrid vehicles, and thus help customers meet ever-stricter emission requirements.

NORMA Group is also well positioned for the growth market of electromobility thanks to its future-oriented product portfolio. Accordingly, research and development activities relating to purely battery-powered electric vehicles and hybrid vehicles represent a strategic focus, as part of which new product solutions are being developed and current products constantly enhanced. Regulatory measures such as stricter exhaust gas standards and the resulting increased demand for environmentally friendly products and technologies thus open up a variety of opportunities for NORMA Group in the fields of Mobility and New Energy.

On the other hand, risks for NORMA Group could arise from the ongoing debate regarding compliance with emission standards for vehicles with combustion engines. The company counters these risks through continuous initiatives aimed at securing and expanding its technological and innovative leadership and by focusing on customers and markets. Accordingly, NORMA Group systematically analyzes current market developments in the area of future technologies and consistently develops new products based on this analysis. In the context of a steadily increasing share of purely battery-powered electric vehicles, it will continue to be important for NORMA Group to be able to offer suitable innovative product solutions in this dynamic environment. In the area of fuel cell-powered vehicles as well, products have already been successfully placed on the market. For example, NORMA Group has already been supplying a line system for a fuel cell vehicle in series production since 2018 that could lead to further research and follow-up projects. RESEARCH AND DEVELOPMENT

Water management is another strategically important segment for NORMA Group that has been consistently expanded and strengthened through the acquisitions made in recent years. Here, the increasing scarcity of resources that can be seen in many regions and the responsible handling of this important resource in this context are leading to business opportunities.

NORMA Group’s strong diversification in terms of customers in different industries is yet another element of the company’s risk and opportunity management. NORMA Group counters long-term industry-specific opportunities and risks through a consistent innovation policy and regular market analyses, which provide the best possible support for the targeted identification of and focus on high-growth future markets.

In summary, the industry-specific and technological opportunities and risks are assessed to be possible with a moderate financial impact.

Risks and opportunities associated with company strategy

NORMA Group’s strategic goal is to achieve a sustained increase in the company’s value. In view of this goal, NORMA Group is pursuing the strategy of profitably expanding its business activities through organic growth as well as selective value-enhancing acquisitions and achieving broad diversification with respect to its products, regions and end markets, in order to become less dependent on individual products, regions and end markets. This goes hand in hand with NORMA Group’s aspiration to grow in current end markets and tap into new end markets with innovations, superior product quality and strong brands, as well as to continuously improve the efficiency of its business processes in all functional areas and regions. With this in mind, the “Get on track” change program was launched already at the end of 2019 with the goal of increasing NORMA Group’s profitability and flexibility. This was also consistently implemented in 2021. STRATEGY AND GOALS Furthermore, NORMA Group addresses sustainability issues such as climate change and water and resource scarcity with its strategic orientation and pursues corresponding activities as part of the company-wide CSR program. The resulting opportunities and risks are evaluated on a regular basis. Climate Protection

Besides the company’s strategic activities aimed at continuing to develop the business organically, NORMA Group sees considerable opportunities to sustainably increase the Group’s financial result, particularly through its strategy of profitably expanding its business activities by making selective, value-adding acquisitions. NORMA Group has been able to demonstrate the success of this strategy on many occasions in the past by completing its acquisitions. If, however, in individual cases, the development of the acquired companies falls behind the expectations at the time of acquisition or if integration progresses more difficultly than assumed, risks could also arise from acquisitions for NORMA Group. However, NORMA Group believes that the company’s goals for the profitability of potential acquisitions, careful due diligence measures in advance of the acquisition, and well-coordinated integration plans form the basis for mitigating these risks accordingly.

In addition, opportunities for NORMA Group to achieve its financial targets arise from the broad diversification with regard to its products, regions and end markets. Should demand in individual regions and end markets or demand for individual products temporarily lag behind planning, NORMA Group still has the chance to compensate for this by turning to other regions, end markets or products. Nevertheless, such broad diversification with regard to products, regions and end markets also implies a certain degree of complexity, which can be associated with risks for NORMA Group. Because NORMA Group’s diversification efforts are being carried out step by step with regard to the regions and end markets as well as its products, these risks can be limited appropriately by adapting the organization to the changed circumstances. Accordingly, NORMA Group is addressing the reduction of complexity and streamlining of its current product portfolio via an independent field of action as part of its “Get on track” change program.

With respect to the efficiency of its business processes, NORMA Group’s global orientation enables the company to set up production processes that require more manual assembly work in countries with lower labor costs and thus secure or further increase its profitability. However, these types of decisions on the locations for sites and the related investments are inevitably associated with risks if key assumptions made at the time of the investment decision prove to be incorrect. NORMA Group addresses the respective risks by conducting careful analyses in advance of investment decisions and uses graded approval procedures. Risks from site decisions already made are evaluated across all regions as part of the “Get on track” change program and included in decisions on optimizing the capacities of Group sites.

When the corporate strategy initiatives of NORMA Group are combined, the financial impact of the opportunities associated with NORMA Group’s company strategy is assessed as moderate and a positive deviation from planning as still possible. Based on the measures taken to limit the risks associated with NORMA Group’s company strategy, the probability of the occurrence of strategic risks is considered unlikely, while the potential financial impact of company strategy risks is considered moderate.

The company strategy is adapted to the individual market conditions in the individual segments. For instance, acquisitions are made particularly in those countries and regions that offer attractive growth opportunities for NORMA Group. Nevertheless, the general assessment of company strategy opportunities and risks in the regions is identical.

Operational risks and opportunities
Commodity prices

The materials NORMA Group uses, in particular the raw materials steel and plastics, are subject to the risk of price fluctuations. The price trend is also influenced indirectly by the further development of the global economic situation as well as by institutional investors. NORMA Group limits the risk of rising purchase prices through systematic material and supplier risk management. Thanks to a powerful global Group purchasing structure, economies of scale are being used to purchase the most important commodity groups as competitively as possible. This Group purchasing structure also enables NORMA Group to balance out the risks of individual segments with each other. NORMA Group also constantly strives to secure permanently competitive procurement prices by continuously optimizing its selection of suppliers and applying the best-landed-cost approach. The company also tries to reduce dependency on individual materials through constant technological advances and testing of alternative materials. NORMA Group protects itself against commodity price volatility by concluding procurement contracts with a term of up to 24 months, whereby material supply risks are minimized and price fluctuations can be calculated more accurately.

In fiscal year 2021, NORMA Group was confronted with various effects of the ongoing corona pandemic, unforeseen weather events and persistent raw material shortages in the steel and granule sector. This resulted in production downtimes and thus material shortages at NORMA Group suppliers in all industrial sectors worldwide and ultimately led to a general increase in demand and price levels for the materials needed. The blockade in the Suez Canal, the continued reduced availability of sea freight containers and the price increase for diesel fuels also led to higher prices in the transportation sector. Details on the individual areas are described in the section on purchasing and supplier management.

Taking into account NORMA Group’s procurement portfolio, price increases or fluctuations in the prices of raw materials are considered very likely overall (previous year: “likely”). However, due to the measures implemented, such as medium-term framework agreements and regular price monitoring, the resulting financial impact is considered to be low. Similarly, opportunities arising from possible declines in raw material prices are also considered to be low in terms of their financial impact. Against the backdrop of the complete procurement spectrum and taking into account the prevailing volatility on the raw material markets, price reductions are still considered unlikely overall.

Suppliers and dependencies on key suppliers

The loss of suppliers and dependencies on individual suppliers can lead to material bottlenecks and thus have negative effects on the Group’s business activities. In order to minimize this risk, NORMA Group works exclusively with reliable, progressive suppliers who meet its high quality requirements. All main and strategically important suppliers are visited regularly and assessed as part of quality management. If there are any indications of supplier defaults, alternative options are evaluated immediately. Risks arising from the insolvency of key suppliers, lack of delivery reliability and quality problems are also addressed by the established supplier monitoring system. In addition, the existing sourcing strategies and regular material risk analyses help reduce risks. In addition, opportunities arise for NORMA Group to reduce risks by means of an operational risk management tool that was implemented in the first quarter of fiscal year 2021. Based on artificial intelligence, it continuously provides information about external events relating to suppliers, NORMA Group sites as well as the associated supply chains and immediately initiates measures. In particular, as a result of the ongoing corona pandemic and the global increase in unpredictable external events (e.g. extreme weather events), risks from supplier dependencies are considered likely (previous year: “possible”). However, taking the measures implemented into account, the potential financial extent is considered to be low (previous year: “moderate”).

However, NORMA Group also sees opportunities in this area as a result of its proactive approach both in terms of current supplier relationships as well as identification of new suppliers and raw materials. Since further optimization in the area of purchasing can also be anticipated in the medium term due to the “Get on Track” change program rolled out at the end of 2019, the potential from the measures implemented to date for a positive deviation from planning is considered possible. The financial impact of the measures initiated continues to be assessed as low.

Quality and processes

NORMA Group’s products are often mission critical with respect to the quality, performance and reliability of the final product. Quality defects can lead to legal disputes, liability for damages or the loss of a customer. Therefore, the reliable guarantee of product quality is a key factor to ensuring NORMA Group’s long-term success, so that its products provide crucial added value for its customers. Quality management Maintaining the right balance between cost leadership and quality assurance is a constant challenge. To reduce this risk, far-reaching quality assurance measures and uniform Group-wide quality standards are used. Furthermore, NORMA Group focuses on innovative and value-added joining solutions tailored to meet customer requirements. For this reason, the company believes that it is possible for quality risks to occur, while the potential financial repercussions would be minor due to its insurance coverage against loss events.

NORMA Group takes every opportunity to realize cost advantages to improve its competitive position. The company develops and implements initiatives focused on cost discipline, the continuous improvement of processes in all functions and regions and the optimization of supply chain management and production processes. These initiatives are expected to have a positive impact on its business. Production and logistics Since NORMA Group pursues a continuous process of improvement, there are opportunities over and above planning for positive deviations in the area of these processes. This applies for all regions NORMA Group is active in. The company estimates the likelihood of cost savings to be possible. Since planning already allows for continuous optimization of production processes, and NORMA Group’s processes are already extremely efficient, the short-term financial impact of a deviation from the plan as a result of improved production processes is minor. Due to extensive, Group-wide activities to track planned cost savings and process improvements, the probability that these will not be achieved is assessed as possible with a low financial impact.


Customer risks result from being overly dependent on important customers with whom the Group generates a rather significant share of its sales. These customers could take advantage of their bargaining power, which could lead to increased pressure on the company’s margins. Decreases in demand from these customers or the loss of these customers could have a negative impact on the company’s earnings. For this reason, NORMA Group continuously monitors incoming orders and customer behavior so as to identify customer risks early. The financial repercussions of customer risks are reduced by its diversified customer portfolio. Accordingly, no single customer accounted for more than 4% of sales in fiscal year 2021. Therefore, it is considered possible that customer risks could have a negative impact on NORMA Group’s business, however the financial effects would be minor – particularly in light of the volatile demand in the markets – and are assessed as moderate here (previous year: “low”).

Based on NORMA Group’s strategy and the goal of further expanding its markets, the company managed to expand its customer portfolio compared to the previous year. Thanks to an attractive product range, innovative solutions and – especially in the area of water management – good availability of products, new customers were gained for NORMA Group products in all regions. Therefore, the opportunities for positive deviations from planning thanks to a growing number of customers are assessed as possible with a minor effect on earnings.

Risks and opportunities of personnel management

NORMA Group’s success is largely dependent on its employees’ enthusiasm, commitment to innovation, expertise and integrity. The Group’s human resources work is therefore aimed at developing and expanding these core competencies, among other skills. The departures of employees with vital skills as well as a shortage of trained workers could have a negative impact on NORMA Group’s operations. Furthermore, competition for the most talented employees as a result of demographic developments and the shortage of skilled labor in Western industrial nations of particular importance to NORMA Group is becoming more and more intense.

NORMA Group counters these risks with far-reaching programs and activities aimed at increasing its attractiveness as an employer. Besides establishing and expanding further education, training and support programs as well as competitive remuneration systems, variable remuneration systems in particular are aimed at promoting the alignment of the workforce with the company’s success. In return, NORMA Group’s employees contribute to its continuous further development by participating in employee surveys and improvement initiatives. Extensive personnel planning activities as well as a distribution of tasks that is geared towards interdisciplinary cooperation protect NORMA Group against risks that could arise if an employee leaves despite an efficient organizational structure. When identifying potential new employees who can make a crucial contribution to performance, NORMA Group also seeks the advice of external human relations advisors.

While NORMA Group regards the probability of personnel risks occurring as possible overall, the potential financial impact is considered to be low (previous year: “insignificant”) due to a sustainable personnel policy.

In addition, opportunities arise from the consistent further development of employees. NORMA Group fosters its employees and offers them incentives to develop their personal expertise even further through educational and training opportunities as well as the targeted search for talent within the Group. NORMA Group also offers its employees flexible and family-friendly working time models. Through the above-mentioned measures, NORMA Group actively supports the retention of knowledge and thus also ensures the development of knowledge within the company, which will thus offer opportunities for the future development of NORMA Group. The occurrence of these opportunities is considered likely, whereby the associated financial success is considered to be minor.

IT-related risks and opportunities

The use of functional and high-performance IT systems is of key importance for an innovative and global company like NORMA Group with regard to the effectiveness and efficiency of its business processes. In this context, it is critical for the company’s success to support NORMA Group’s business processes, some of which are organized across company and national borders, along the value chain with stable and high-performance IT systems that provide the management at all levels of the company with the necessary information in a timely manner and allow for workflows to be organized efficiently. IT solutions that are precisely tailored and linked to the respective ERP systems are also of immense importance for the exchange of information with NORMA Group’s customers and suppliers. With regard to this business-critical IT infrastructure, there is a risk that a severe breakdown of these systems, due to technical malfunctions of the systems or attacks by hackers, for example, could seriously disrupt the company’s operations.

In addition, NORMA Group sees the risk that external parties could gain unauthorized access to sensitive company information and make improper use of it. In this context, unauthorized access to information on production processes, financial, customer and employee data in particular could have negative consequences for the company.

In response to these risks, NORMA Group has implemented a number of measures that are embedded in the IT risk management process and are continuously adapted to changing conditions. For example, NORMA Group counters the IT risks that are identified by arranging for redundant provision of business-critical applications and databases via physically separated data center areas, using decentralized data storage and outsourced data archiving to a certified external provider, and by using state-of-the-art firewalls and e-mail filters and security monitoring by the dedicated Security Operations Team (SOC). Employee access to sensitive information is controlled by using authorization systems customized for the respective positions, taking into account the principle of segregation of duties. Finally, training courses for employees and awareness campaigns on aspects of information security are held on a regular basis. Furthermore, strategic cybersecurity models to protect the digital company infrastructure and digital services (e.g., private and public clouds, SaaS applications) are being gradually implemented. The gradual transfer of old ERP systems to new, uniform Group systems, which was continued in 2021, also harbors risks. During the necessary process changes at the respective plants and distribution centers, adjustment problems could arise at the process level that could result in additional shifts or special freight requirements, for example. Redundant internal and external resources are kept available to mitigate these risks, if necessary. Furthermore, delays in the individual implementation projects can possibly lead to higher implementation costs.

Despite the countermeasures in place, the probability of occurrence of IT-related risks continues to be assessed as likely in all regions and the potential financial impact as moderate.

The risks arising from the migration from the old ERP systems to uniform new systems for the entire Group are also likely to be offset in the medium term by opportunities arising primarily from the potential for process standardization and optimization across all companies in NORMA Group. The opportunities that could result from this standardization are regarded as probable. The related financial effects are expected to be low.

Legal risks and opportunities
Risks related to standards and contracts

Future changes to legislation and requirements, especially liability law, environmental law, tax law, customs law and labor law, as well as changes in related standards, could have a negative impact on NORMA Group’s development. Violations of laws and regulations, but also of contractual agreements, can lead to penalties, regulatory requirements or claims from injured parties. Conversely, NORMA Group can be adversely affected by legal or contractual breaches by third parties. In addition, defective products could result in legal disputes and liability for damages. Likewise, the results of tax audits can lead to tax payments, including penalties and interest.

As in the previous year, litigations generally involved labor disputes, most of them in Germany. Besides lawsuits against dismissal, disputes with employee representatives were a major focus of labor law proceedings. Disputes with customers mainly involved purchase price claims, alleged product defects and delayed deliveries. NORMA Group managed to assert claims against suppliers in connection with defective deliveries. Furthermore, NORMA Group conducted proceedings on its own or third-party IP rights as well as due to customs issues.

NORMA Group uses its current compliance and risk management systems to ensure that it complies with constantly changing laws and regulations. Furthermore, the company ensures that it meets its contractual obligations. NORMA Group counters the risk of product defects through its Group-wide quality assurance program. Quality management In addition, NORMA Group is also insured against claims arising from certain defective products.

NORMA Group is exposed to tax risks in particular due to the significant changes in international tax law currently being observed (e.g. the OECD BEPS initiative), which in some cases give rise to unresolved legal issues, and due to the increased intensity of tax audits in many countries. Risks also arise in other areas from questions of interpretation or application with regard to new or increasing legal requirements, such as the Supply Chain Act, which will come into force in 2023.

Overall, the probability of occurrence of risks in connection with standards and contracts continues to be assessed as possible. The extent of the potential financial impact of these risks is assessed as moderate, however, due to the risk management measures in place.

Known legal risks to which NORMA Group is exposed and whose occurrence is sufficiently specified are adequately taken into account by provisions in the Consolidated Financial Statements.

Social and environmental standards

Violating social and environmental standards could damage the reputation of NORMA Group and result in restrictions, claims for damages or disposal obligations. NORMA Group has therefore implemented Corporate Responsibility as an integral part of the Group strategy. In this context, a systematic Environmental Management System was introduced at NORMA Group so that company decisions can always be evaluated also considering the goal of avoiding emissions and conserving resources. The company also invests in the area of occupational health and safety for its continuous improvement. Employees

The probability of occurrence of negative developments due to social and environmental risks is still estimated as possible and their potential financial impact as low (previous year: “moderate”).

Investments in the area of Corporate Responsibility serve not only to ward off risks, however. The measures and initiatives are also seen as having the potential to positively impact both the business environment as well as NORMA Group and its stakeholders. Therefore, NORMA Group estimates the opportunities in this area to be possible and assumes that the measures and initiatives will have only a minor impact on its planning.

Intellectual property

Violations of intellectual property rights could lead to lost sales and reputation. For this reason, the company ensures that its technologies and innovations are legally protected. NORMA Group also minimizes the potential impact by developing customer-specific solutions and through its speed of innovation. At the same time, it is also possible for NORMA Group to violate the intellectual property of third parties. Therefore, developments are reviewed for potential patent violations at an early stage. Despite these measures, there is still a risk of using third-party intellectual property. The probability of infringements of intellectual property is therefore assessed as probable (previous year: “possible”). However, the potential impact of IP-related disputes and other possible infringements is considered to be low (previous year: “moderate”). In addition, consistently protecting intellectual property and building up unique legal selling points are also seen as potential opportunities that could lead to a slight deviation from planning.

Assessment of the overall profile of risks and opportunities by the Management Board

The Group’s overall situation results from the aggregation of individual risks and opportunities from all categories of the business units and functions. After assessing the likelihood of risks occurring and their potential financial impact as well as in light of the current business outlook, NORMA Group’s Management Board does not believe that there is any individual risk or group of risks with the potential to jeopardize the continued existence of the Group or individual Group companies as a going concern. Taking the aggregated opportunities into account, NORMA Group is, in the opinion of the Management Board, in a very good position with respect to both the medium and long terms to further expand its market position and grow globally. This assessment is reinforced by its strong ability to cover its financing requirements. Therefore, NORMA Group has not made any effort to obtain an official rating from a leading rating agency.

General economic risks remain for NORMA Group in all areas, which is why setbacks on the way to long-term realization of the growth and profitability targets cannot be ruled out. In contrast, there are clear opportunities that NORMA Group is taking advantage of through its strategy and consistent opportunity management, so that it is possible that the company could even exceed its profitability targets.

In summary, the changes in the individual opportunities and risks shown in the overview have no significant impact on NORMA Group’s overall risk profile. NORMA Group has therefore concluded that the Group’s overall profile has not changed significantly compared to the previous year. Due to the further development and revision of the valuation methodology of the risk management system currently in use at NORMA Group, the comparability of the risk situation with the previous year is limited as of the balance sheet date December 31, 2021. However, no significant valuation effect results from the changes in the risk management system on the basis of the analyses carried out.



Probability of occurrence


Financial impact





Very likely

Change comp. to







Change comp. to


Financial risks and opportunities


Default risk


























Change in interest rates











Economic and cyclical risks and opportunities














Industry-specific and technological risks and opportunities















Strategic risks and opportunties













Operational risks and opportunities


Commodity pricing





















































Risks and opportunities of personnel management














IT-related risks and opportunities














Legal risks and opportunities


Risks related to standards

and contracts






Social and environmental













Property rights












1_If not indicated differently, the risk assessment applies for all regional segments.


These contents are part of the Non-financial Group Report and were subject to a separate limited assurance examination.