Risks and risk management
Business risks and their management
Geopolitical situation
The geopolitical situation has affected Olvi’s operating environment. The war in Ukraine has significantly increased business risks. The pandemic caused problems in the availability of raw materials and packaging materials, and the war has further complicated the procurement of materials. The increase in the costs of materials, which started during the pandemic and continued in 2023, has levelled out as a whole since the beginning of 2024. However, uncertainty about prices and availability has continued in the market as a result of the war in Ukraine, geopolitical tension and weather events caused by climate change. Logistics costs have remained at a high level. Olvi is responding to the increase in costs by improving operational productivity and assessing sales prices and selections to maintain profitability.
Consumer behaviour
Despite the easing of the increase in the overall cost level, high consumer prices continue to weaken consumers’ purchasing power and affect consumer behaviour. This change is already being reflected in a shift in consumption to more affordable product options. In addition, overall consumption may decrease, and the premiumisation trend may come to a halt. However, 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 subsidiary operates independently in Belarus and is responsible for its procurements, among other aspects. In addition, the IT operating environment has been separated. The subsidiary finances its operations with cash flow from its own operations.
During 2024, legislative changes have been implemented in terms of dividend payments and laws preventing the sale of companies. The payment of dividends abroad by Western-owned companies has been restricted for 2024–2025 by setting regulations on maximum amounts. According to the current interpretation, the dividend that the Belarusian company can legally pay to the parent company is around EUR 1–3 million annually in 2024 and 2025. According to the management’s assessment, the now known temporary restriction on the payment of dividends by the Belarusian subsidiary does not impair the parent company’s ability to pay dividends. Despite legislative changes related to the prohibition to sell, the sales restrictions concerning shares in Olvi’s subsidiary remain in force. Olvi has no permission to sell shares in its Belarusian subsidiary. We monitor the legislative situation and actively evaluate the prerequisites and options for operating in the market.
Other current risks
Cybersecurity threats have increased because of the escalation of the global geopolitical situation, among other reasons. Olvi Group has prepared for increased information security threats in a variety of ways, and the new requirements under the NIS2 cybersecurity directive have been implemented according to schedule.
The EU Packaging and Packaging Waste Regulation has been adopted. It will enter into force on 11 February 2025 and will apply from 12 August 2026. The regulation also contains a number of transitional provisions for the start dates of the various obligations. In the coming years, the Commission will issue a number of implementing and delegated acts, as well as guidelines to further specify the requirements and their application. According to the current estimate, the new regulation will have a negative impact on the energy consumption and, consequently, climate emissions of product manufacturing and logistics, as well as on water consumption, which will have a direct impact on Olvi Group’s chances of achieving the set environmental targets. In addition, it is likely to cause needs to invest in reusable bottles and transport packaging and in equipment for product filling and handling. We are monitoring the implementation process closely and are seeking to affect the application guidelines of the regulation so that the sustainability aspects of Olvi Group’s countries of operation are also taken into account.
Sustainability risks are identified through human rights and climate change impact assessments as part of the company’s strategic, business, financial and compliance risks.
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 security and sustainability risks, for example.
A more detailed description of the 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 at www.olvigroup.fi/en/ (Investors > Olvi as an investment > Risks and risk management).