Investor Presentaiton

Risk Factors (cont'd) Certain tax positions taken by the Group require the judgment of management and could turn to be inefficient or challenged by tax authorities. The Group's main tax risks are related to changes to or possible erroneous interpretations of tax legislation. Such changes or erroneous interpretations could lead to tax increases or other financial losses. Realization of such risks might have a material adverse effect on the Group's business, financial condition, or results of operations. It is possible that the Group has made interpretations of the tax provisions that differ from those of the tax authorities in the various countries in which the Group operates, and that as a result, the tax authorities will impose taxes, tax rate increases, administrative penalties, or other consequences on the Group's companies. This could have a material adverse effect on the Group's business, financial condition, or results of operations. If the Group loses its current CEO or key management or is unable to attract and retain the talent required for its business, the Group's operating results may suffer. The Group's success depends on its employees, which as of 31 December 2018 totaled 857 persons (full-time equivalent). Familiarity with internal processes and operational expertise of the Group's employees are critical factors in the efficiency of the Group's business operations. There is a risk that the Group will not be able to retain its key employees, which will have a significant impact on the Group's business operations. The Group is especially dependent on the expert knowledge of its CEO and majority shareholder Jorma Jokela as well as key management members in IT, legal, operational, financial as well as risk and analysis positions. If any of the key managers or other critical employees were to leave the Group or join a competitor, the Group may be unable to attract and retain suitable replacements. As a result, the Group may be unable to pursue its business operations as planned and this will have a material adverse effect on the Group's business, financial condition, or result of operations. Laws and regulations may restrict the Group's possibility to conduct its business and its profitability. The Group operates in a business that is heavily regulated. Present and potential future applicable laws and regulations may restrict the way the Group may conduct its business and may reduce its profitability. Legal requirements in respect of, for instance, interest rate caps may limit the Group's pricing of its products which would have a negative impact on the Group's earnings and result of operations. EU regulations in respect of e.g. capital requirements may also restrict the Group's possibility to conduct its business should the Group not have sufficient access to equity capital in order to fulfill applicable laws. This will have a negative impact on the Group's business, financial condition and result of operations. In addition to the aforementioned, the extensive laws and regulations in the business the Group operates in require the Group to spend both financial and human resources in order to ensure compliance with all applicable laws. There is a risk that an increase in regulations may necessitate the Group to spend even more financial and human resources in order to ensure legal compliance and to continue its business, which will have a material adverse effect on its business and financial condition. The Group may incur property, casualty or other losses not covered by insurance. There is a risk that the Group could sustain damages or incur liability claims that are not covered by the Group's insurance coverage in whole or in part. Further, there is a risk that insurance policies will not continue to be available, or that they will not be available at economically feasible premiums. The actual losses suffered by the Group may exceed the Group's insurance coverage and would be subject to limitations and excesses, which could be material. The realization of one or more damaging event for which the Group has no or insufficient insurance coverage will have a material adverse effect on the Group's business, financial condition, or results of operations. Moreover, any claims the Group makes under its insurance policies or the occurrence of an event or events resulting in a significant number of claims being made may also affect the availability of insurances and increase the premiums the Group pays for its insurance coverage. Hence, if the Group is unable to maintain its insurance cover on terms acceptable to it or if future business requirements exceed or fall outside the Group's insurance coverage or if the Group's provisions for uninsured costs are insufficient to cover the final costs, there is a risk that it will adversely impact the Group's operations, earnings and financial position. REGULATORY AND LEGAL RISKS The Group is subject to various consumer protection laws, other local legal and regulatory requirements and European law, changes of which or interpretations of which by authorities could significantly impact the Group's business. Changes to local legislation require the Group's respective local subsidiaries to adapt operations to ensure compliance with such changes. Failure to timely implement procedures that comply with new rules will have a material adverse effect on the Group's business, financial condition, or results of operations. There is a risk that local courts, regulatory agencies and financial supervisory authorities, issue new regulations or interpretations or find the Group's services to be in violation of local or EU-wide legal requirements such as license requirements, maximum interest rate provisions, transparency requirements or other regulatory requirements. For instance, there is a risk that the Finnish financial supervisory authority in the future would be of the view that, or issue an interpretation to the effect that, the Group's operations would be considered to require an authorisation or licence in Finland, since the parent company of the Group is Finnish, which the Group does not currently hold. In such case, the Guarantor or another entity within the Group would need either to apply for such authorisation or licence or to restructure the business in such manner that it is in compliance with the new requirements. Adverse judgments based on such findings or new regulations or interpretations could result in legal claims, administrative sanctions and reputational damage against the Group, need for restructuring or new licensing of the Group or alterations to the business carried out by the Group. Further, existing loan agreements might be held null and void by local courts. As a consequence, the Group may be restricted in successfully offering its services in certain jurisdictions or may be forced to terminate its business in certain jurisdictions. This could have material adverse impacts on the financial and market position of the Group. In the past, the Group has had to allocate resources in order to adapt its business model and product offerings in several countries as a result of regulatory changes. There is a risk that future regulatory changes may be too burdensome to comply with or may result in its business model in a particular jurisdiction becoming unprofitable. Such developments could have a material adverse impact on the financial and market position of the Group. The Group may fail to successfully manage the diverse sets of regulatory requirements the Group currently is subject to and may face regulatory problems entering into new markets. Business operations in a wide set of different jurisdictions with diverse statutory requirements necessitates careful management of the legal and regulatory challenges of many fields, including but not limited to: (i) licence requirements, (ii) maximum interest rate regulations, (iii) distance contracts regulations, and (iv) consumer protection legislation. These diverse legal frameworks implicate various legal and regulatory risks, including but not limited to the risks of market entry in new jurisdictions. The legal requirements for launching the Group's business in new jurisdictions vary significantly with some jurisdictions having no registration/licence requirements, while some jurisdictions requiring licences, e.g., a banking licence. Entering new jurisdictions implicates challenging legal requirements on a local level. Failure to comply with local legal requirements will have a material adverse effect on the Group's business, reputational standing, financial condition, or results of operations. In addition, the diversification of the group also increases its legal costs and continued compliance costs with local laws and regulations. ferratum 66