Investor Presentaiton
BOARD OF DIRECTORS' REPORT
Risk management
Risks
Weakening of the economic environment,
particularly in China
Geopolitical tensions impacting the
competitiveness of KONE's supply chain, leading
to increased costs or causing potential
disruptions
Changes in the competitive or customer
landscape, customer requirements or
competitors' offerings impacting KONE's
competitiveness
Increasing material, fuel and/or logistics costs
weakening KONE's profitability
A failure to secure and develop the needed
organizational capabilities and competencies
Risks related to component and subcontracted
labor availability
Product integrity, safety or quality issues as well
as issues with reputation
Interruptions to KONE's or its suppliers'
operations
IT system interruptions and cybersecurity risks
Financial risks
Mitigation actions
KONE strives to continuously develop its competitiveness in all regions and businesses. KONE has a wide geographic presence, global
manufacturing capabilities and supply network, as well as a balanced business portfolio with a high share of maintenance business.
KONE actively monitors the development of the applicable and relevant regulations, policies and trade rules, prepares for alternative
scenarios and evaluates the competitiveness and viability of KONE's supply chain and sourcing channels. KONE is taking actions to
mitigate the impact of tariffs, for example by applying for tariff exemptions when applicable. KONE also applies increased scrutiny over
business operations that may be affected by international trade restrictions or other geopolitical actions.
KONE aims to be the industry leader with its competitive offering by investing in research and development and by taking an open
innovation approach. KONE also closely follows emerging industry and market trends and actively monitors opportunities for industry
consolidation.
KONE aims to offset cost increases by improving the margin of orders received and adopting dynamic pricing and contract models which
allow KONE to pass on increased supply costs. Improving pricing, securing productivity gains and lowering product costs remains high on
KONE's agenda.
KONE continuously evaluates the skills and competences required for the execution of the selected strategy and develops and/or acquires
these from internal talent pools or externally. KONE also has extensive training programs in place to develop and retain critical talents.
KONE's sourcing processes aim to identify critical suppliers and supply categories and implement alternative sources, long-term
agreements, last-buy options and other measures to ensure the availability of the supply. KONE has also developed multinational
subcontractor pools to ensure subcontractor capacity on a regional level. Subcontractors' competences and capabilities are monitored and
developed continuously, similarly as with own employees.
The semiconductor market is closely monitored, and the situation managed with detailed planning of delivery execution and active
involvement of supply chain partners among other actions.
To mitigate product risks, KONE has strict quality control processes for product design, supply, manufacturing, installation and
maintenance. In addition, KONE aims for transparent and reliable communication, to prevent reputational risks and to manage potential
incidents. KONE also has stringent corporate governance principles in place.
KONE actively develops business continuity management capabilities to reduce the impact and likelihood of disruptions within its supply
chain. Furthermore, KONE monitors the operations, business continuity management capabilities, financial strength and cybersecurity of
its key suppliers. In addition, KONE aims to secure the availability of alternative sourcing channels for critical components and services.
KONE also has a global property damage and business interruption insurance program in place.
KONE's global supply chain helps mitigate the risk of interruptions. KONE has 10 manufacturing facilities in 7 countries, multiple
distribution centers and a large supplier network across the globe, which helps to mitigate the impacts from potential disruptions in
individual locations or countries.
KONE's security policies define controls to safeguard premises, information and information systems which are both in development and in
operation, in order to detect cybersecurity incidents and to respond and recover in a timely manner. KONE works with third-party security
service providers and trusted, well-known technology partners to manage the risks through the control framework. KONE conducts tests,
reviews and exercises to identify areas of risk and to ensure the appropriate preparedness. The company continues to invest in its
cybersecurity capabilities based on these findings. KONE also has a global cyber insurance program in place.
KONE applies centralized risk management in accordance with the KONE Treasury Policy. More information on financial risk management
can be found in notes 2.4, 3.2 and 5.3 of KONE's Financial Statements 2022.
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