Opportunities and Risks
As a company with global operations and a diversified portfolio, the Covestro Group is subject to a number of opportunities and risks.
Opportunity and risk management at Covestro is an integral part of the Group’s corporate governance system. See the “Opportunities and Risks Report” in the Combined Management Report in the Annual Report 2021 for a detailed explanation of our opportunity and risk management system and opportunity and risk situation.
Changes in the Risk Situation
Geopolitical risks increased considerably in the first half of 2022, especially as a result of the Russian war against Ukraine. This means that the continued supply of natural gas to Europe is subject to major uncertainty. In contrast to the presentation in the Annual Report 2021, we have identified another material individual risk for Covestro in the production/value chain risk category. If supplies of natural gas from Russia were to become significantly scarce or halt entirely, this could, depending on the duration, necessitate the closure of certain of Covestro’s production facilities, or of entire plants or product lines in Germany. This could in turn result in production outages of certain chemical precursors, intermediates, and by-products that are needed at other sites in the EMLA region.
Several teams of experts in the company are monitoring the current situation closely, studying the consequences of the war in detail, and working on mitigation plans. The potential losses are being analyzed continually, and these analyses are integrated into existing processes to also monitor factors such as risk bearing capacity.
As a result of the assessment of the aforementioned risks as well as with regard to the Covestro Group’s other opportunity or risk factors, no material changes have been made to the presentation of risk categories in the Annual Report 2021. At the time this Half-Year Financial Report was prepared, there were again no risks that could endanger the Group’s continued existence.
No new material developments have occurred in the legal proceedings presented in the Annual Report 2021, and no new material legal proceedings are pending.