Strategic business risks

Strategic business risks

Tightening competitive environment due to competitors’ increased - realized or planned - production capacity and price pressures, especially in Asia, received considerable attention in the risk assessment, as these developments put downward pressure on the company’s margins. The company has focused on e.g. optimizing product quality, improving its R&D operations as well as market monitoring and business intelligence to mitigate the issue. In R&D, for example collaboration with third parties such as universities has been increased. Also longer-term contracts with customers have been sought.

Changes in the demand for Ahlstrom’s products due to macroeconomic conditions were perceived as less of a risk than in previous years, but still as a significant risk. Economic cycles affect the demand for Ahlstrom’s products especially in the building, marine and automotive industries. Additionally in wind power, the role of government subsidies is important. Economic cycles also have an impact on the price development of the raw materials used. On the other hand, the effect of cycles is less pronounced in the food, packaging, medical and healthcare industries where Ahlstrom also has a strong presence globally. The company has responded to the uncertainty in demand by e.g. improving its demand planning process and the flexibility of its asset base, as well as developing products that better respond to customer needs.

The risk related to changes in the political environment in the Group’s operating countries was highlighted in the 2015 risk assessment. Trade sanctions and other political events can affect the company directly and indirectly. While these events are outside of the company’s influence, it can mitigate potential effects by e.g. active demand planning and flexible operations. Also a tracking system with the aim of preventing sales to trade embargoed countries is in place. Political changes can also present the company with new business opportunities if trade is facilitated with countries such as Iran and Cuba.

Another change in the competitive landscape facing the company is the wider adoption of SMS (spunbond-meltblow-spunbond) technology in the Food & Medical Business Area compared with the current wet-laid technology. The Group is in the process of redesigning its product portfolio and lowering the cost structure of its existing products in response to this development, as well as investing in new technology.

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