Risk and Opportunity Profile of NORMA Group

As part of the preparation and monitoring of the risk and opportunity profile, NORMA Group assesses risks and opportunities based on 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 to determine the potential maximum average annual impact in the period under review of the risk management system:

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

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

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

•High: more than EUR 30 million effect 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 5% 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

Overall, there are no significant changes in the risk assessment compared to the risk and opportunity assessment published in the 2023 Annual Report. In particular, however, the following risk areas have a potential impact on

NORMA Group’s business operations – in the overall macroeconomic context  –  or the risk assessment has been adjusted:

In view of the global trend toward declining inflation, central banks have begun to lower key interest rates or have stopped raising them. Overall, NORMA Group expects this trend to continue. For this reason, interest rate risks are still assessed as “possible.” However, taking into account countermeasures taken in the area of financial management, the financial impact associated with potential interest rate changes is now assessed as “low” (in the 2023 Annual Report: “moderate”). NORMA Group continues to rate opportunities related to interest rate changes as “very likely,” but with “low” financial impact (in the 2023 Annual Report: “moderate”).

Despite moderate growth in the global economy over the course of the fiscal year so far, the global economy is likely to continue to be under pressure overall. Developments in the European automotive market are particularly relevant for NORMA Group. The first half of 2024 was impacted there primarily by declining production figures and a reluctance to invest by industry. ECONOMIC REPORT 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 has not changed fundamentally compared to the risk and opportunity assessment published in the 2023 Annual Report. Overall, the industry-specific risks are therefore still assessed as “possible.” Taking into account the countermeasures put in place and the corresponding planning assumptions, the potential financial impacts related to industry-specific and technological risks are still classified as “moderate.”

NORMA Group continuously develops and implements initiatives aimed at cost discipline and the continuous improvement of production processes. Corresponding activities have been and are being intensified and implemented in a structured manner as part of the initiated growth and efficiency program ‘Step Up.’ SIGNIFICANT EVENTS IN THE FIRST HALF OF 2024 Overall, process-related risks continue to be assessed as “possible,” while their potential financial impact is classified as “low.”

In addition, risks from legal disputes in the US with customers and former employees have recently increased. NORMA Group creates provisions based on the current status of the respective legal disputes. Overall, the probability of occurrence of risks related to standards and contracts is still assessed as “possible” and the potential financial impact as “moderate.”