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. A pandemic, increased geopolitical uncertainties and disruption to global financial markets are events that may entail a poor economic climate.
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 industrial companies in various industries even though new customers from other geographic markets such as China and Brazil have been added in recent years .
EXPOSURE: Semcon is an international company with activities in Sweden, the UK, Brazil, Norway, Germany, Hungary and China. The percentage of sales to customers outside Sweden amounts to 27 per cent (29).
RISKS: Semcon’s business is affected to varying degrees by developments and dependency on individual industries.
MANAGEMENT: To minimise the dependency on individual industries, Semcon is prioritising growth in many different sectors, such as industry, energy, life science and the public sector.
EXPOSURE: Since last year, exposure to individual industries has been reduced and the main sector, automotive/mobility, has decreased to 31 per cent (35) of the Group’s total sales.
RISKS: A customer can end an assignment or 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 European industrial companies in various sectors. The ten largest customers account for 46 per cent of the Group’s total sales, which is 1 percentage point lower than in 2020. One customer accounted for more than 10 per cent of total sales, with a share of 11 per cent.
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 endeavours to be an attractive employer and thereby improve employees’ job satisfaction. There is considerable focus on training, recruiting and onboarding activities. The November employee survey provided confirmation that Semcon’s employees enjoy their work, as our employee Net Promoter Score (those who would recommend Semcon as an employer) increased to 41 (34), a new high for the Group.
EXPOSURE: Increased mobility in the labour market for engineers and system developers meant employee turnover rose to 23 per cent (15) in 2021.
RISKS: Semcon’s employees depend on access to a properly functioning IT environment and infrastructure. Unscheduled disruption, shortcomings in cybersecurity, breaches and loss of data could have a highly negative impact on operations and loss of income.
MANAGEMENT: Procedures, systems and guidelines for information security regulate, for example, backup management and how employees are to maintain the highest possible security level towards all stakeholders. During the year, additional investments were made in software and tools to prevent data breaches.
EXPOSURE: No serious disruption or incidents were reported during the year.
RISKS: Semcon’s presence on the global market carries sustainability risks in the areas of human rights, working conditions, environment and corruption. Given the current climate transition, where many of our customers will need to transform their entire operations, there are major opportunities for Semcon but also transition risks where Semcon needs to further develop its offerings and competences to meet new customer needs.
MANAGEMENT: Semcon reduces its exposure to sustainability- related risks using regulatory frameworks and guidelines, such as the company’s Code of Conduct and complementary policies. We take a zero-tolerance approach to any form of corruption and have a framework in place that clarifies the ethical rules for Semcon’s conduct towards customers and other stakeholders. In addition, we have a whistleblowing function where each employee is given the opportunity to anonymously report any breaches of law or the Code of Conduct. We have accelerated Semcon’s climate action agenda and measure the Group’s emissions throughout the value chain. Semcon’s climate targets are aligned with the Paris Agreement’s 1.5°C ambition and we are now preparing a roadmap to ensure the targets are achieved. We are actively working to integrate relevant sustainability aspects into Semcon’s customer offering, to ensure that we have employees with the right expertise and credible business partners.
EXPOSURE: No cases of infringements against the Code of Conduct or other serious irregularities were reported during the year.
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 functional sourcing contracts. 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.
EXPOSURE: Every reduction or increase in total annual fees by one percentage point impacts income and results by about SEK 15 million.
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 expertise from various Semcon offices on projects. During the year, 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.
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. During the year, a review of insurance cover took place in all of the Group’s markets.
EXPOSURE: Over the years, Semcon has only used its insurance on a few occasions.