Investor Presentaiton

Risk Factors (cont'd) The Group is subject to floating rate interest rate risks. The Group is subject to cash flow interest rate risk which is the risk that the future cash flows of a financial instrument will fluctuate due to changes in market interest rates. Fair value interest rate risk entails the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. For instance, the Group's main interest rate risk arises from long-term borrowings that are issued with floating rate interest, amongst others, a EUR 25 million bond issued by the Group's Maltese banking subsidiary in 2016, with an additional EUR 15 million issued in connection with a tap issue in 2017, at a floating interest of EURIBOR plus a margin of 6.25% and a EUR 100 million bond issued by the Issuer in 2018 at a floating interest of 3 month EURIBOR plus a margin of 5.5%. These borrowings expose the Group to a cash flow interest rate risk. Should the risks relating to cash flow interest rate risk materialise in the future, this could have a material adverse effect on the Group's business, financial condition, or results of operations. The Group's business and results of operations may be adversely affected if the Group is unable to manage its growth effectively. The Group's expansion strategy contemplates the fast growth in mobile consumer loan volumes in current markets and the establishment of operations in new markets such as Brazil and Nigeria in 2017, Norway, France, Mexico and Canada in which the Group entered in 2015 or Germany and Romania which the Group entered in 2014. The Group's continued growth in this manner is dependent upon a number of factors, including the ability to develop efficient internal monitoring and control systems, the ability to implement high-quality business and management processes and standards, the ability to develop and implement "best practices" in response to day-to-day business challenges, the ability to secure adequate financing to successfully establish operations in new markets, the ability to turn new operations profitable within the expected time after the market entry, the ability to correctly assess legal requirements in targeted markets and monitor on-going changes in existing markets, the ability to obtain any government permits and licences that may be required, the ability to develop adequate and secured IT-platforms, the ability to successfully integrate any operations which may be acquired in the future, the ability to identify and overcome cultural and linguistic differences which may impact market practices within a given geographic region, and other factors, some of which are beyond the Group's control. Therefore, there is a risk that the Group will not be able to effectively manage the expansion of its operations or that the Group's current personnel, systems, procedures, and controls will be adequate to support the Group's operations. Any failure of management to effectively manage the Group's growth and development could have a material adverse effect on the Group's business, financial condition, or results of operations. In some countries, certain consumer loan products of the Group may not be offered in the same manner as in other countries due to more restrictive bank and consumer regulation. For instance, there are countries in which consumers cannot instantly access the Group's mobile consumer loan products. Under these circumstances, the business success of the Group depends on its ability to offer consumers alternative and equally attractive products. Failure to offer such alternative products may result in lower revenues of the Group in the respective markets. Since the establishment, the Group has expanded its product portfolio, which now consists of Microloans, instalment loans (so called Plus Loans), a Credit line product, Prime Loan as well as small business loans (Ferratum Business) and invested in further development of scoring capabilities by founding a dedicated company (Ferratum International Services Oy) and acquiring software that enables the analysis of a broad set of customer data. Product variations provide the Group with a diversified product portfolio. Nonetheless, the launch of new products - even when based on the same processes, systems, and scoring as the existing products - involves additional investments and carries the risk of product failure or implementation delays. Intensified investment costs and product introduction failure or delays may have a material adverse effect on the Group's business, financial condition, or results of operations. In addition, in 2015 the Group started its drive to become a mobile bank. In this regard, the Group has already and is further making significant investments into its internal operational structure and product offerings, including a mobile banking platform, its deposit taking operations, as well as investments, enhancements and modifications to its anti-money laundering risk, foreign exchange risk, liquidity risk, operational risk and fraud risk systems and processes. Should the Group be unsuccessful to establish itself as a mobile bank or if this strategy is delayed or more costly than expected, this could jeopardize return on investments, reduce profitability, lead to lost investments and thus could have a material adverse effect on the Group's business, financial condition, or results of operations. Organic growth, product variations, and geographical expansion are core components of the Group's growth strategy. However, growth through acquisitions (through the acquisition of a competing business or a loan portfolio or customer database) may also comprise part of the Group's strategy. Such acquisitions are accompanied by respective transactional risks. Any future acquisition may require significant financial resources (including cash). If the Group experiences any difficulties in integrating acquired operations into its business, the Group may incur higher than expected costs and may not realize all the benefits of such acquisitions. This could lead to adverse accounting and financial consequences, such as the need to write down acquired assets, which will have a material adverse effect on the Group's business prospects, financial condition or results of operations. Any disruption in the Group's information systems or external telecommunication infrastructure worldwide could adversely affect the Group's operations. IT systems are an essential component of the Group's business due to the diverse use of automated processes and controls. The Group improves its current systems continuously and has developed new systems, and introduced comprehensive maintenance schemes for its existing software. The Group utilizes a proprietary in-house loan handling system, which provides control and automation of day-to-day business. However, due to the open nature of the internet and the increasing sophistication of online criminality, all web-based services are inherently subject to risks such as online theft through fraudulent transactions and inappropriate use of access codes, user IDs, usernames, PINS, and passwords. In addition, despite the comprehensive maintenance efforts and careful development of the IT systems, they might fail and significantly impact the Group's operations. Damage to the Group's IT systems and software or failure to protect its data against a cyber- attack will have a material adverse effect on the Group's business, financial condition, or results of operations. The Group relies on telecommunications, the internet, as well as mobile and online banking services worldwide in order to conduct its operations and offer its services to customers. To access the Group's online consumer loan portals, the Group's customers need to have an internet access or a mobile data connection. Disruption of such or similar telecommunications and internet services in the respective countries of operation due to equipment or infrastructure failures, strikes, piracy, terrorism, weather-related problems, or other events, could temporarily impair the Group's ability to supply its product portfolio to its customers, which in turn could have a material adverse effect on the Group's business, financial condition, or results of operations. If the Group fails to geographically diversify and expand its operations and customer base, its business may be harmed. Several countries that the Group operates in such as Latvia, Estonia, Norway, Spain, the Netherlands, the United Kingdom, Australia, Poland, the Czech Republic, Denmark, Finland and Sweden generate a significant share of the Group's revenues. As a result, the Group is exposed to country-specific risks with respect to such national markets. In such markets, a dissatisfaction with the Group's products, a decrease in customer demand, the failure of the Group to successfully market new and existing products, or the failure to further expand its customer base and retain its existing customer base in these mature markets will have a material adverse effect on the Group's business prospects, financial condition or results of operations. If the Group will not be able to continue providing Group wide services through specific service companies, the Group's business may be harmed. Within the Group, there are several entities providing services to the operating companies. Should the Group not be able to continue the business operations of these service companies in the future, there is a risk for a material adverse effect on the Group's business, financial condition or results of operations. ferratum 64