Short-term risks and uncertainties
At Kemira, a risk is defined as an event or circumstance, which, if it materializes, may affect Kemira’s ability to meet its strategic, operational and financial goals in a sustainable and ethical way. Kemira’s risk management policy and principles proactively protect and help Kemira to reach the desired aggregate risk level and ensure the continuity of Kemira's operations.
Kemira’s main short-term risks and uncertainties are related to uncertainties in the global economic development. A potential low-growth period in the global GDP would have a negative impact on the demand for Kemira’s products, especially in the Paper and Oil & Mining segments, and it could also delay some future growth projects. Weak economic development may also have serious effects on the liquidity of Kemira’s customers, which could result in increased credit losses for Kemira. The prices of many raw materials decrease in the unfavorable market conditions but the availability and price risk related to some of Kemira’s raw materials may increase. Kemira’s geographical and customer-industry diversity provides only partial protection against this risk.
The continuous improvement of the profitability is a crucial element of Kemira’s strategy. Significant increases in raw material, commodity or logistic costs could place Kemira’s profitability targets at risk. For instance, high oil and electricity prices could materially weaken Kemira’s profitability. Changes in the raw material supplier field, such as consolidation or decreasing capacity, may increase raw material prices. Poor availability of raw materials may affect Kemira’s production if the company fails to prepare for this by mapping out alternative suppliers or opportunities for process changes. Raw material and commodity risks can be effectively monitored and managed with Kemira's centralized Supply Chain Management function (SCM).
The lack of suitable and reliable partners for collaboration may slow down the development of an efficient business model in Asia. Development of the new products and their successful commercialization are crucial factors for Kemira’s growth efforts in Asia, and possible failure in these is a considerable risk for the company’s strategy.
The development of a profitable business in Asia can also be threatened by difficulties related to the intellectual property rights and by local competitors. The growth and development of a profitable business model in Asia comes under risk if Kemira is not successful in hiring, inducting and managing to retain skilled and motivated employees. In line with its strategy, Kemira pays particular attention to the development of its operations and risk management in Asia. In practice, the risk management is executed by Kemira’s organization in the Asia-Pacific (APAC) region.
Kemira holds assigned emissions allowances under the EU Emissions Trading System at one site in Sweden. In addition, the Oulu plants in Finland submitted a permit application to the authorities concerning emission.
Changes in the exchange rates of key currencies can affect Kemira’s financials.
A detailed account of Kemira’s risk management principles and organization is available on the company website. An account of the financial risks is available in the Notes to the Financial Statements 2012. Environmental and hazard risks are discussed in Kemira’s Sustainability Report that will be published as part of the Kemira Annual Report 2012 during the week beginning on February 25, 2013.