Risk management
For information on risk management, see also Corporate Governance, 3.7 Information and control instruments vis-à-vis the Group Executive Board, third paragraph.
As part of the process of risk identification, risk analysis and risk management, the following risks have been rated as significant for the Geberit Group:
Performance of the European building construction industry
Renovations, which are less cyclical, account for a significant share of total sales. Consequently, the Geberit Group is less exposed to fluctuations in building construction activity. Given that modern sanitary technology still has relatively low levels of penetration in many markets, there is also a considerable degree of long-term potential for sales growth – regardless of the economic climate. However, an increase or reduction in inventories at wholesalers can have a significant short-term impact on the sales figures at Geberit.
Availability of materials
The availability of materials for the production process is ensured by a prudent procurement strategy with a strong regional and local orientation, institutionalised purchase processes and a strong focus on cooperative relationships with suppliers.
Changes in the competitive environment
The comprehensive product range and innovative products ensure that the Geberit Group is able to maintain a leading market position. The company’s strong partnership with the craft sector, sanitary engineers and investors, and its constructive collaboration with wholesalers also play a key role as part of the three-stage sales model.
IT security
The Geberit Group is continually working to improve and further develop its information technology (IT security). This includes taking defensive measures against cyberthreats as well as detecting and dealing with any cyberattacks efficiently. Extensive measures have been established in the interests of business continuity. In terms of organisation, an IT security committee consisting of the CFO (chair), Head of Operations of the Group, Head IT of the Group and Chief IT Security Officer is responsible for all relevant aspects of IT security. The Chief IT Security Officer has an internal team of IT security specialists and a network of external service providers in the field of IT security. The Group Executive Board receives intensive training on IT security twice a year, including simulations of hacker attacks. The IT security committee informs the Board of Directors at regular intervals (at least once a year) on the progress made, maturity level and planned measures in the field of IT security. All members of the Board of Directors are trained in this area and have in-depth knowledge in the fields of IT/digital/IT security.
The company’s IT systems undergo a comprehensive and detailed security check according to IT security standards – including the ongoing assessment of newly emerging risks – involving the input of external specialists on a regular basis. The latest checks confirmed a good level of security. Geberit also has a training programme on IT security in place for all new employees and for employees who have not acted appropriately during phishing tests. After consideration of costs and return, the company has not taken out an insurance policy for IT security. All in all, the Geberit Group is at least on par with industrial companies of a similar size and complexity in terms of IT security.
Compliance with laws
The Geberit Group is exposed to certain legal risks that arise from normal business activity. Comprehensive compliance processes are in place for the purpose of preventing violations of the law or regulations.
Management of currency risks
In general, the effects of currency fluctuations are warded off as far as possible with an efficient natural hedging strategy. This entails making sure that costs in the various currency areas are incurred in the same proportion in which sales are generated. As a consequence of this natural hedging strategy, currency fluctuations have no significant impact on operating margins. Gains and losses result mainly from the translation of local results into Swiss francs (translation effects). In terms of a sensitivity analysis, the following changes can be assumed if the Swiss franc should be 10% weaker or stronger than all other currencies:
- Net sales: +/-9%
- EBITDA: +/-9%
- EBITDA margin: +/-0 percentage points
For more information on the management of currency risks, see also Consolidated Financial Statements Geberit Group, Note 4 and Note 15.
Climate-related risks
Climate-related risks are an integral part of the risk management system and are regularly reviewed and assessed in terms of their financial significance. A differentiation is made here between physical risks and transitional risks. Physical risks such as extreme weather conditions or long-term climate change could impact procurement, logistics and production. Thanks to local strategies and monitoring, Geberit considers the financial impacts of these risks as being low to moderate. Transitional risks – for example, due to legal or technological changes – are addressed with investments in resource-efficient production and innovative, sustainable products. This creates opportunities to generate additional sales with energy- and water-saving solutions.