Weakened demand due to inflation, rising interest rates and economic downturn
Inflation, rising interest rates, high energy prices and economic uncertainty have an impact on consumer purchasing power and companies’ willingness to invest. In grocery trade, product price has an emphasised impact on consumer purchase decisions, while customers in car trade may postpone their purchases. In building and technical trade, construction and renovation projects may be postponed, which would impact sales and inventory management.
Growing tensions in security policy as a result of the war in Ukraine and the potential expansion of the conflict, as well as tightened military and economic competition between superpowers could have a significant impact on Kesko’s operating environment, supply chain continuity, and product availability.
Growing, professional cybercrime has resulted in higher risk on business continuity and loss of critical information. Targets of cyber-attacks may include, for example, data systems critical for business continuity or personal data. Cyber-attacks may result in business disruptions, loss of customer trust, or fines imposed by authorities.
Serious disturbances affecting resources and operations that are critical for business continuity, such as personnel, logistics, and information systems, could cause business disruptions. For example, a personnel strike related to the labour market situation, an extensive fire at the central warehouse, or a telecommunications issue caused by a power outage could result in a significant problem for business continuity.
Compliance with laws and agreements
Changes in legislation and authority regulations could necessitate significant changes and result in additional costs. Compliance with laws and agreements is an important part of Kesko's corporate responsibility. Non-compliance can result in fines, claims for damages and other financial losses, as well as loss of trust and reputation. The EU General Data Protection Regulation has placed more importance on the need to protect personal data.
Availability and retention of personnel
The implementation of strategies and the achievement of objectives require competent and motivated personnel. The Covid-19 pandemic made the workforce more mobile and lowered the threshold of changing jobs. Issues related to the availability of skilled personnel in logistics and retail have also become more prominent.
The impact of risks related to climate change for Kesko are assessed using selected climate scenarios. Increase in extreme weather phenomena can impact product availability and cause disturbances in logistics and the store site network. The impacts of Kesko’s operations on the climate, in turn, are related to Kesko’s energy solutions and emissions, and the lifecycle impact of products and services sold in the whole supply chain.
A failure in product safety control or in the quality assurance of the supply chain could result in financial losses, the loss of reputation and customer trust, or, in the worst case, a health hazard to customers.
Store sites and properties
Good store sites are a key competitive factor for business growth and profitability. The acquisition of store sites can be delayed by town planning and permit procedures and the availability and pricing of sites. Considerable amounts of capital or lease liabilities are tied up in properties for years. As a result of urbanisation, changes in the market situation, growing significance of e-commerce, or a chain concept proving inefficient, there is a risk that a store site or a property becomes unprofitable, and operations are discontinued while long-term liabilities remain.
Responsible operating practices and reputation management
Various aspects of corporate responsibility, such as ensuring responsibility in the purchasing chain of products, fair and equal treatment of employees, the prevention of corruption, and environmental protection, are increasingly important to customers. Any failures in corporate responsibility could result in negative publicity for Kesko and cause operational and financial damage. Challenges in Kesko’s corporate responsibility work include communicating responsibility principles to customers and ensuring responsibility in the purchasing chain of products.
Reporting to the market
In its investor communication and financial reporting, Kesko follows the disclosure policy approved by Kesko’s Board of Directors. Kesko's objective is to produce and publish reliable and timely information. Disclosure follows the principle of providing all market participants information in a timely manner and non-selectively to form the basis for the price formation of Kesko’s financial instruments such as shares. Should the information published by Kesko prove incorrect, or should communications fail to meet regulations in other respects, it could result in losing investor and other stakeholder trust and in possible sanctions. Significant business arrangements, tight disclosure schedules and the dependency on information systems create challenges for the accuracy of financial information.
Risks of damage
Accidents, natural phenomena and epidemics can cause significant damage to people, property or business. In addition, risks of damage may cause business disruptions that cannot be prevented.