Key Corporate Risks

Investment Case

Key Corporate Risks 2019

Short-Term (next 12 months)

In the 2018 annual risk review, the most relevant strategic risks, in the short term, are seen as risks related to investments, reaching the strategic targets and mergers and acquisitions. There is a risk that the company will make unprofitable investments and/or will pay too high a price for acquisitions based on incorrect assumptions related to e.g. market and/or business development. In addition, there is a risk of the company failing to fully understand and exploit the business opportunity provided by fast growing coworking market.

The most significant operational risk relates to human resources, and the company’s ability to attract and commit the needed key personnel to implement and execute the company’s strategy. In addition, there is an information technology related risk of the current IT systems not supporting operations in an optimal manner; systems to fully corresponding to business needs, lack of timely updates on relevant systems and using fragmented and incompatible IT infrastructure that can cause inefficiencies and increase the IT spend.

The most relevant financial risk was assessed as relating to unfavorable exchange rate movements that may lead to deteriorating profitability. In addition, the company’s ability to manage its liquid funds was estimated to pose a risk. Financial risks are described in more detail in the Financial Risk Management -section of this report as well as in the notes section (Note 22) of the Financial Statements for 2018.

In the short term, external risks were seen as relating to market dynamics, like intensifying competition on the traditional office market and/or new business models emerging to compete with Technopolis’ model. Also any unexpected market conditions due to e.g. an oversupply of office space or due to an economic downturn may prevent Technopolis from reaching its growth targets and maintaining its profitability. In addition, changes in geopolitical situation, were assessed as a risk.

Medium-Term (next 36 months)

In the 2018 annual risk review, the most relevant strategic risks, in the medium term, are  seen as risks related to the company failing to fully understand and exploit the business opportunity provided by fast growing coworking market as well as its ability to expand its services business through development of new services. In addition, there is a risk that the company will fail to capture digitalization potential.

The most relevant operational risk relates to human resources, and the company’s ability to attract and commit the needed key personnel to implement and execute the company’s strategy. In addition, there is an information technology related risk of the current IT systems not supporting operations in an optimal manner. Furthermore, there is a risk that in operating new businesses, like coworking, Technopolis may base decisions on incorrect assumptions / financial planning or encounter challenges in choosing / securing optimal locations, securing sufficient resourcing and succeed in sales. Also, continuous development of the core operating processes is in focus.

The most relevant financial risk, on a three-year perspective, relates to the risk of breaching of financial covenants.

External risks, in medium term, were evaluated to be largely the same as in the short term, and relate to market dynamics, possible changes in customer preferences and to any unexpected changes in market conditions.

Last updated 28.2.2019