Getinge 2022 Annual Report

Getinge 2022 Annual Report Introduction Strategy Corporate Governance Annual Report Sustainability Report Other information Contents Quality risks from a regulatory perspective Description Significant parts of Getinge's product range are covered by legislation stipu- lating extensive assessments, quality control and documentation. Potential consequences It cannot be ruled out that Getinge's operations, financial position and earnings may be negatively impacted in the future by difficulties in complying with current regulations and requirements of author- ities and control bodies or changes to such regulations and requirements. Management To limit these risks to the greatest possible extent, Getinge conducts extensive work focused on quality and regulatory issues. The group-wide Quality Compliance, Regulatory & Medical Affairs function has a representative in the Getinge Executive Team and also a representative on the management teams of each Business Area, and the function is represented in all R&D and production units. In addition, Getinge's sales force and service technicians receive relevant quality and regulatory training every other year to renew their certification. This is a requirement for representing Getinge. The majority of the Group's production facilities are certified according to the medical device quality standard ISO 13485 and/or the general quality standard ISO 9001. In total, the Group allocates significant resources to quality and regulatory matters in order to best manage this risk exposure, and quality is the overall priority in the Group's strategy. During the second quarter of 2022, an internal investigation was completed related to potential violations of German medical device laws associated with sterile packaging of HLS sets, for which a total of five current and former Getinge employees are being investigated by the prosecution authority in Baden-Baden, Germany. As a consequence, structural changes are being made to strengthen the culture of quality in the organization. Comprehensive remediation measures regarding packaging have already been initiated and Getinge is fully cooperating with the prosecution authority. At this stage, it is not possible to estimate whether the final outcome of the public investigation will have any impact on Getinge. Product quality from a customer perspective In certain cases, Getinge's products do not meet customer expectations. Customers experiencing shortcomings in Getinge's product quality results in a higher risk of customers choosing other suppliers. This could entail a risk of lower sales and lower profitability over time. Getinge applies a far-reaching quality process that aims to ensure a high and even level of quality to meet customers' legitimately high requirements. This is an ongoing process that results in continuous improvements. When quality fails, it is important to rapidly bring the right equipment on site to rectify the fault during the first service visit. Getinge closely monitors the "first time fix" factor of its services operations and works extensively to make improvements related to such faults or shortcomings. Interruptions in supply chains/dependence on external suppliers External suppliers that deliver critical components to the Group are a highly important part of Getinge's manufac- turing process. Production disruptions may arise if these components are not supplied on schedule. One of the potential consequences of this is that life saving equipment may not be delivered to customers as required for maintaining critical healthcare. Getinge works actively to monitor critical suppliers. This process is initiated when the partnership is established and is then continuously monitored. The Purchasing organization has tools for evaluating risk and for training in this area. The Group also works on ensuring that it has adequate levels of critical components in stock, either in its own operations or with the relevant supplier. Interruptions of critical deliveries are also an important part of activities related to business continuity risks. See "Business interruptions" below. Digitization and innovation Getinge's future growth depends on the company's ability to develop new and successful products, particularly in the area of digitization. Getinge's ability to innovate is a very important factor in retaining and establishing leading posi- tions for the Group's product segments. Innovation efforts are costly and it is not possible to guarantee that developed products will be commercially success- ful, which could result in impairment. In the long term, the Group's position in the market could be negatively affected if Getinge is unsuccessful in this area. As means of maximizing the return on investments in research and development, the Group applies a structured selection and planning process that includes careful analyses of the market, technological progress, choice of production method and selection of subcontractors. The actual development work is also conducted in a structured manner and each project undergoes a number of fixed controls. The Group is particularly concerned with ensuring access to the right skills, retaining key individuals, being an attractive employer to recruit talent externally, and identifying and developing talent within the organization. Fragmented product portfolio Getinge's product portfolio consists, to a certain extent, of a large number of acquisitions that were made throughout the years within a variety of product categories. An offering to our customers that, in certain parts, is too diverse could lead to Getinge lacking the critical mass needed to conduct fully efficient operations in all product categories. Efforts are being made to enhance the efficiency of the customer offering under the framework of the ongoing strategic activities in each Business Area. The introduction of the new EU Medical Device Regulation means priorities need to be made regarding the certification of products under the new regulatory framework. Products have been selected that, over the long term, will be a part of the customer offering, which will lead to increased concentration as well as streamlining. 52 52

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