Risk and Opportunity Profile of NORMA Group

As part of the preparation and monitoring of the risk and opportunity profile, NORMA Group assesses opportunities and risks on the basis of their financial impact and probability of occurrence. The financial impact of opportunities and risks is assessed on the basis of the effect on the Group’s earnings and liquidity. The following four categories are used with reference to the potential maximum average annual impact in the period under review of the risk management system:

•    Low: up to EUR 5 million impact on earnings or liquidity

•    Moderate: more than EUR 5 million and up to EUR 15 million impact on earnings or liquidity

•    Significant: more than EUR 15 million and up to EUR 30 million impact on earnings or liquidity

•    High: more than EUR 30 million impact on earnings or liquidity

 

The interval used sets the financial impact of a risk or opportunity in relation to the EBIT of the Group or a segment if the respective risk or opportunity relates solely to a specific segment. The assessment of opportunities and risks whose financial impact has an effect on line items in the Consolidated Statement of Comprehensive Income below EBIT is also performed in relation to EBIT. The presented impact always reflects the effects of countermeasures initiated. The probability of individual risks and opportunities occurring is quantified based on the following four categories:

•    Unlikely: up to 5% probability of occurrence

•    Possible: more than 10% and up to 25% probability of occurrence

•    Likely: more than 25% and up to 50% probability of occurrence

•    Very likely: more than 50% probability of occurrence

 

Compared to the risk and opportunity assessment published in the 2022 Annual Report, there are no significant changes with regard to the risk assessment. However, in particular – in the overall economic context – the following risk areas have a potential impact on NORMA Group’s business operations: 

Overall, it can be assumed that the economy will continue to be burdened. In particular, shortages of materials, continuing high rates of inflation and further potential interest rate hikes are having a negative impact on economic growth. Furthermore, the Chinese market in particular has not recovered as strongly as expected after the COVID-19 pandemic, which continues to influence global economic and business trends. Despite NORMA

Group’s successful efforts to reduce the risk of material shortages due to the Russia-Ukraine war, it is still not possible to fully predict the possible further impact of the Russia-Ukraine war on the global economy and the overall economic development. NORMA Group therefore continues to classify economic and cyclical risks as “possible” and continues to classify the financial impact – taking countermeasures into account – as “moderate.”

The market situation with reduced vehicle production – among other things due to the supply bottlenecks that continue to prevail, especially for microchips – has fundamentally improved compared to the risk and opportunity assessment published in the 2022 Annual Report. Overall, however, the industry-specific risks are still assessed as “possible.” Considering the countermeasures taken and corresponding planning assumptions, the potential financial impact related to industry-specific risks continues to be classified as “moderate.”

NORMA Group constantly develops and implements initiatives that focus on cost discipline and the continuous improvement of production processes. In addition, NORMA Group continues to work with increased focus on stabilizing and improving operational processes at the sites in Maintal, Germany, and Hustopeče, Czech Republic, in order to minimize additional costs as well as further optimize productivity and increase efficiency. Overall, process-related risks continue to be assessed as “possible,” while their potential financial impact is classified as “low.”

The current macroeconomic situation points to further inflation risks, which could have a corresponding effect on NORMA Group in the form of an increase in interest rates for financing and thus higher financing costs for borrowed capital. NORMA Group continues to assess interest rate risks as “likely.” Considering the countermeasures taken in the area of financial management, the financial impact associated with potential changes in interest rates continues to be assessed as “low.”