Managing risks – a part of conducting business
Swedish Match is exposed to a number of risks which could have a negative impact on our business.
Important risks to address arise in the areas of competition, production, regulation, currency and interest rates and IT security.
Swedish Match operates in highly competitive markets, which require an agile organization in a continually changing environment. In the event that Swedish Match cannot provide a better offering to the consumer than competitors, there is an increased risk to both customer purchases and the ability to realize price changes.
Production facilities are exposed to risk of various harmful incidents such as fires and machinery breakdown, as well as potential natural disasters or global health crises such as a pandemic and other catastrophic events, along with effects related to climate changes. Such incidents may affect both production facilities and employees. Production interruptions could cause quality or delivery problems.
A loss of a key supplier or a supplier’s non-compliance with regulations or unethical behavior could be harmful to Swedish Match. Potential consequences are delivery or quality problems or difficulties in the interaction with other stakeholders including sales to consumers.
Swedish Match is exposed to a high degree of regulation from various authorities. Regulations could have a restricting impact on how the Group can operate its business and interact with its stakeholders or direct financial impact in the form or increased taxes or imposed fees. Regulations, many related to the Group’s involvement in the tobacco industry, concern among other issues, tobacco excise taxes, marketing, packaging, warning labels, ingredients, reporting to authorities, product approvals, and introduction of new products. Many authorities have and continue to implement various forms of restrictions on sales and usage of tobacco and other nicotine containing products.
Currency and interest rate risks
The dynamic financial market conditions are continuously changing with fluctuating currency exchange rates and interest rates.
Currency rate risks
A weakening of certain major currencies, such as the USD versus the SEK, could cause lower financial results presented in SEK from the translation of foreign operations. The transaction exposure is relatively low as most production is located in the country where sales are conducted.
Interest rate risk
Higher interest rates could have a negative impact on net finance expense.
Information security risk
IT systems help manage and make business processes more efficient and reliable, but could also lead to higher risk for the organization. Key business processes such as production management, invoicing, customer support and financial reporting rely on IT systems. Increasingly sophisticated and frequent cybercrimes could result in significant outages or application failures to our infrastructure, and cause reputational damage, considerable business disruption or adverse impact on business-critical data. The information assets within Swedish Match are of fundamental importance for our business. Proper handling of the assets is important for the trust of employees, customers, and partners. Swedish Match needs to ensure confidentiality, integrity, and availability of information most important to Swedish Match.
Major sustainability risks include climate risk, child labor and inability to adhere to plans and targets set out for the focus areas of Swedish Match. Risks related to sustainability are detailed in the sustainability report for 2022.