Opportunities and Risks
As a global enterprise with a diversified portfolio, the Covestro Group is exposed to a wide range of opportunities and risks.
The Covestro Group regards opportunity and risk management as an integral part of corporate governance. Our opportunity and risk management system and the opportunity and risk situation are outlined in detail in the “Opportunities and Risks Report” section in the combined management report of the 2019 Covestro Annual Report.
Changes in the risk situation
Material changes in Covestro's risk situation compared with the situation described in the 2019 Annual Report resulted primarily from the current worldwide coronavirus pandemic. The rapid outbreak of the coronavirus led governments and Covestro alike to take a host of countermeasures to prevent the further spread of the virus and therefore to protect people's health and well-being.
The countermeasures range from officially issued stay-at-home orders and temporary business closures to the promotion of certain types of social distancing and compliance with minimum hygiene standards. This alone led to significant curtailment of business activities — at Covestro and at our suppliers and customers — which adversely affected and continues to affect the supply of raw materials as well as demand for our products. The impact of these effects on our volumes sold and the company's operating result also depends on the duration of the individual measures.
Covestro has already developed a far-reaching pandemic plan. This plan calls for a global crisis management team as well as local crisis management teams, which work with local authorities to determine options for securing continued operations at Covestro's own production facilities and therefore to ensure our delivery capability. Furthermore, the teams work on measures to protect the health of employees at work, e.g., by providing training sessions or protective gear such as mouth-and-nose masks and disinfectants.
Covestro's Board of Management actively monitors the worldwide development of the coronavirus pandemic. Required adjustments or expansion of existing measures are made in line with recommendations and instructions issued by the relevant governments and committees of experts.
The full range of the pandemic's consequences for the global economy cannot be foreseen at this time. Substantial economic damage has already occurred. The pandemic is expected to have a long-term impact on the economic situation worldwide and therefore the business performance of Covestro as well. Currently, we estimate this risk to be a mid-level risk based on our assessment matrix. This is currently Covestro's greatest challenge.
In addition, we now consider the risk of negative economic performance to be high based on the change in the likelihood of occurrence.
However, the company has not identified any risks that could endanger the company’s continued existence at this time or in the future.
In comparison with the situation presented in the 2019 Annual Report, there have been no new significant developments in the legal proceedings described there, and no new material legal proceedings are pending.