Risks
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Isabelle Ljunggren
Investor Relations Manager
+46 (0)708 30 08 90
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Risks.

Semcon is exposed to a number of risks that may affect the Group’s results. Semcon has chosen to divide the risks the company faces into financial  and business-related risks. Semcon evaluates and identifies significant risks continually at the organization and in strategic planning.

Financial risks

The company has identified five financial risks that could affect earnings:

  • Financing risks
  • Interest rate risks
  • Liquidity risks
  • Currency risks
  • Credit risks

 

For further information about financial risks, see Note 4 on page 57 in the Annual Report 2016.

Business-related risks

Economic climate dependency

RISKS: Semcon’s customers are affected to varying degrees by a poor economic climate as this can negatively
impact demand for Semcon’s services.
MANAGEMENT: Semcon continuously works to broaden its customer base to minimise dependency on different
markets and industries as well as individual customers, which may be affected by a poor economic
climate. Semcon’s customer base consists mainly of European companies in the automotive industry and
Nordic industrial companies in various industries even though new customers from other geographic
markets such as China, India and Brazil have been added in recent years.
EXPOSURE: Semcon is a global company with activities in Sweden, Germany, Brazil, the UK, Hungary, India,
China and Norway. The percentage of sales to customers outside Sweden amounts to 24 per cent.

Industry dependency

RISKS: Semcon’s business is affected to varying degrees by developments and dependency on
individual industries.
MANAGEMENT: To minimise the dependency on the Automotive industry, Semcon is prioritising
growth in other industries, such as energy and life science.
EXPOSURE: Since last year, exposure to the Automotive industry has been reduced and amounts to
51 per cent of the Group’s total sales.

Single-customer dependency

RISKS: A customer can end an assignment/Project at short notice or gradually cut back on business
volumes. This can result in a risk, since Semcon cannot always guarantee full cost coverage, particularly
for employees who cannot immediately be transferred to another assignment.
MANAGEMENT: Semcon works continuously to broaden its customer base to minimise its dependency on
single customers.
EXPOSURE: Semcon’s customer base mainly comprises Nordic industrial companies in various sectors and
foreign customers in the automotive industry. The ten largest customers account for 57 per cent of
the Group’s total sales, which is 3 per cent lower than in 2015.

Employees

RISKS: There is always a risk that key employees or a large number of employees choose to leave the
company. There is immense competition for skilled employees, which generally means that salaries may
rise above the agreed contracts, both for groups of employees and individual key employees.
MANAGEMENT: Semcon prioritises activities to be an attractive employer and thereby improve employees’
job satisfaction. Resources are set aside for training, recruiting and induction activities.
EXPOSURE: In 2016, employee turnover was 22 per cent, which is unchanged compared with 2015.

Sustainability

RISKS: Semcon’s presence on the global market carries sustainability risks in the areas of human
rights, working conditions, environment and corruption.
MANAGEMENT: Semcon reduces its exposure to sustainability-related risks using set regulations,
such as the company’s Code of Conduct, which adheres to the UN Global Compact, and its
Quality and Sustainability Policy. Semcon has a certified environmental
management system in place to ensure that environmental legislation is followed throughout
the Group. Semcon takes a zero-tolerance approach to any form of corruption and has a framework
in place that clarifies the ethical rules for Semcon’s conduct in relationships with customers and other
stakeholders. In 2016, a mandatory sustainability course was developed in addition to a training
course for all employees regarding the new bribery legislation. In addition, a whistleblowing function
was implemented during the year, according to which each employee is given the opportunity to
anonymously report any suspected breaches of applicable regulations.

Price pressure

RISKS: The risk of being exposed to price pressure is high in development-intensive industries.
MANAGEMENT: Semcon offers competitive prices in all markets but also gives customers the
opportunity of using Semcon’s entire network of local and international offices. Semcon is continuing
to adhere to its set plan of moving away from fixed hourly-based pricing towards more
performance-based deliveries. This can increase the risk but also provides opportunities
to improve profitability. Price pressure has remained strong, although there are variations
between different sectors and markets. Everyreduction or increase in total annual fees by one
percentage point impacts the outcome by about SEK 15 million. The main priority is to offer the right
solutions for customers and that they are based on results instead of primarily hours delivered.

Fixed price projects

RISKS: 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.
MANAGEMENT: All projects are planned, budgeted and carried out according to joint,
fixed working methods. Semcon 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.
EXPOSURE: During the year, 51 employees received training as part of Semcon’s project manager
training, which is based on the Group’s own Project methodology, the Semcon Project Model.
Additionally, six project managers were certified to lead major Projects.

Liabilities

RISKS: There is a risk that incorrectly carried out assignments and projects can affect results.
MANAGEMENT: The Group is insured according to industry practice for such eventualities.
EXPOSURE: During the year, a review of Insurance cover took place in all of the Group’s markets.
Over the years, Semcon has only used its Insurance on a few occasions.