The company has identified the following business-related risks that could affect earnings including:
Economic climate dependency
Semcon’s customers are affected to varying degrees by a poor economic climate as this can negatively affect demand for Semcon’s services. Semcon constantly works to broaden its customer base to minimize dependency on individual customers affected by a poor economic climate. Semcon’s customer base consists mainly of leading European companies in the automotive industry and Nordic industrial companies in various industries even though new customers from other geographic markets, like China, India and Brazil have arrived in recent years.
Semcon’s business is affected to varying degrees by developments and dependency on individual industries.To minimize the dependency from the automotive industry Semcon is prioritizing growth in other industries, such as life science and energy.
Single customer dependency
A customer can end an assignment/project at short notice or gradually cut back on business volumes. This can cause a risk, as Semcon cannot always guarantee full cost coverage, especially for the employees that cannot immediately take on an assignment. Semcon works continuously to broaden its customer base in order to minimize its dependency on single customers. The Group’s aim is that no single customer should represent more than 10 per cent of overall sales.
There is always a risk that key employees or a large number of employees choose to leave the company. There is huge competition for expert employees, which generally means that salaries rise above the agreed contracts, both for groups of employees and individual key employees. Semcon prioritizes activities to be an attractive employer and thereby improve employees’ job satisfaction. Resources are set aside for training, recruiting and induction activities.
The risk of being exposed to price pressure is high in development-intensive industries. Semcon is continuing to its set plan of moving away from hourly-based invoicing towards more project invoicing and fixed-price assignments. This can increase the risk but also provides opportunities to improve profitability.
Fixed price projects expose the company to risks if projects cannot be completed to budget and/or if the project cannot be completed on time. All projects are planned, budgeted and carried out according to joint, fixed working methods. The Semcon Group actively works with project management and is ISO 9001 and ISO 14001 certified. Meanwhile, projects give the Group the potential of improving profits through efficiency gains and by using employees from various Semcon offices on projects.
There is a risk that incorrectly carried out assignments and projects can affect results. The Group is insured according to industry practice for such eventualities. Over the years Semcon has only ever used its insurance on a few occasions.