Risks
Last updated: March 11, 2025
The most significant strategic risks
Macro-level uncertainties include geopolitical risks, macroeconomic risks and recession risks. Ongoing conflicts, such as wars in Ukraine and Middle East region may expand and new conflicts may arise. Unstable political conditions and geopolitical instability increase the uncertain-ties in global trade and worsen business conditions. Further, tariffs and other trade barriers may slow down investments and economic growth in impacted geographies. Hyperinflation and high interest rates could worsen the business conditions in some market areas. Economic down-turns affect customer and consumer behavior and purchasing power. Huhtamaki is actively monitoring the developments so that it can react to changes relevant in its business environment.
Changes in the business environment driven by regulation and sustain-ability present significant risk and opportunity. The company’s future growth and success depend on its continued ability to predict and respond to changes and its ability to innovate and develop new sustain-able products and solutions in a timely manner. Regulatory changes may introduce material bans and other packaging related regulations, including those related to recyclability, recycled content require-ments, single-use plastics, compostability, supply chain management and extended producer responsibility impacting packaging industry. Further, these regulatory changes include a level of unpredictability, especially in certain geographics. To mitigate the threats, Huhtamaki is investing in new innovative and sustainable solutions. Huhtamaki is also focused on driving an evidence-based discussion to deliver data on the value of packaging in terms of hygiene, food safety, food availability and food waste prevention. Furthermore, Huhtamaki actively tracks early stages of regulatory initiatives and potential regulatory changes to reflect these changes in the development and commercialization of its products and solutions.
Lack of consistent enforcement of new regulations and major delays in customers’ sustainability commitments increase uncertainty and risks related to investments in new innovations. wrong timing of invest-ments may compromise investment payback time.
Changes in competitive landscape, in consumer and customer prefer-ences as well as in technologies and materials present major opportu-nities, but also risks for Huhtamaki. Adequate investments in research and development (R&D) are needed to meet the future customer and consumer needs. Protection of intellectual property is an essential part of R&D. Huhtamaki is also actively screening for strategic partnerships and merger and acquisition (M&A) opportunities to secure a competi-tive advantage on new technology innovations.
To mitigate the risk of its technology and machinery becoming obsolete, inefficient or unfit for serving customer demand, the Group continuously monitors and anticipates long-term needs and invests in new technology.
Understanding consumers enables Huhtamaki to realize business opportunities in building long-term sustainable growth in partnership with its customers. Activities to manage the threats and seize the opportunities involve active dialogue with the customers to develop ways to increase value and understand Huhtamaki´s competitive position, comprehensive commercial excellence program as well as cross-functional and cross-segment collaboration at Huhtamaki.
Large customers offer growth opportunities in developing and manufacturing new sustainable products, but dependence on large customers may also present a risk in case significant portion of revenue comes from a small number of customers. Losing a large customer could affect also capacity utilization.
In terms of human resources, the key risks and opportunities are identified to arise from availability of labor and talent. The risk mitiga-tion actions include consistent development of employee experience including employee promise, hiring practices, onboarding, talent and leadership development and succession planning.
Operational and financial risks
There are risks and opportunities related to the ability to manage prices so that price changes are implemented in a timely manner and with correct cost and market intelligence data. This includes the ability to pass price increases of raw materials, energy and transportation to the price of the products. Risk management actions include ongoing moni-toring of raw material and energy costs, securing cost competitiveness and focus on contract management with energy and material escalation clauses included in customer contracts when possible.
Risks related to information security, IT infrastructure and applica-tions are operational risks potentially impacting the business continuity and operational effectiveness. Risks related to inefficient business processes may weaken the competitiveness. Huhtamaki is continuously developing its IT environment including ERP systems and processes, to enhance productivity and mitigate cyber and other business interrup-tion risks.
Climate change affects the frequency of natural hazards, such as floods and storms. In addition to natural hazards, major fires or disruption in supply chain may cause business interruptions. The company imple-ments a continuous improvement program in property risk manage-ment, designed to reduce the impact and likelihood of hazards, such as fire, explosion, flood or storm. Huhtamaki also develops its disaster recovery and business continuity plans and allocates manufacturing capacity to several locations to minimize the impact of a potential business interruption.
Risk related to non-compliance with laws and sanctions include risk of penalties or claims for compensation, or indictment due to a failure to comply with applicable legislation such as anti-bribery, competition, product, environmental or other legislation or applicable sanctions. Key risk management actions include policies and processes to identify and mitigate the non-compliances, and training on various compliance topics.
None of the key risks identified in connection with the 2024 risk assessment is considered of a magnitude that could not be managed or would endanger the implementation of Huhtamaki’s 2030 Strategy. when considered necessary, appropriate risk treatment actions may also involve a risk transfer by means of insurance. The Group main-tains several global insurance programs. The need for insurance, including the adequacy of its scope and limits, is continuously evaluated by the Global Risk Management function.