Most significant business risks and risk management

Interim Report for 1 January –  30 September 2020 (published 5 November 2020)

Significant short-term risks and uncertainties

There have been no material changes in Caverion’s significant short-term risks and uncertainties compared to those reported in the Half-year Financial Report 2020. Those risks and uncertainties are still valid.

The impacts of the corona pandemic and the consequent economic downturn on Caverion, and the actions taken by the company are summarised separately after this section and described earlier in the report in the “Market outlook for Caverion’s services and solutions” and “Operating environment in the third quarter and during the first nine months of 2020” sections.

The comprehensive description of Caverions’ key risks is available in the Financial Statements 2019 and is still valid.

IMPACT OF CORONA PANDEMIC AND CONSEQUENT ECONOMIC DOWNTURN ON CAVERION

The first wave of the corona pandemic and the consequent economic downturn negatively impacted Caverion’s business in the first half of 2020. After June, the impact reduced and was more limited during the third quarter.

The second wave of corona started in Caverion’s operating countries towards the end of the third quarter, again increasing the risk exposure. The second wave of corona is currently leading to renewed lockdown measures also in Caverion countries and increasing the negative business impacts in the fourth quarter. Any further restrictions such as limiting industrial operations and shutdowns or temporary close-downs of premises or construction sites would further impact Caverion’s revenue level and also profitability.

Caverion’s business is exposed to various risks associated with corona and the economic downturn. These include, for example, suspension or cancellation of existing contracts by customers, lack of demand for new services, absenteeism of employees and subcontractor staff, closures of work sites and other work premises by customers or authorities, defaults in customer payments and lack or poor availability of financing.

Apart from its immediate effects, the corona pandemic has also led to a global economic downturn, which in many areas can negatively impact the general demand and the pricing environment also for Caverion. However, a material part of Caverion’s offering is of such nature that customers will need these services also during a downturn.

It is still unclear how long the corona pandemic will last, how deep and long the consequent downturn will be and what will be the speed of the economic recovery. The business volume and the amount of new order intake are important determinants to Caverion’s performance in the fourth quarter of 2020 and in 2021, but both are still difficult to predict at present.