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Risks and business uncertainties

In the Services business, slow economic growth and political instability in specific regions are the main risks for demand development. The challenging conditions in the offshore and conventional merchant segments are also seen as a potential risk.

In the power generation markets, fragile economic growth and slow decision-making continue to be the primary risks for demand development. Geopolitical tensions and significant currency fluctuations can result in investment decisions being postponed in certain countries. Low oil prices have a similar impact in the oil and gas producing countries. Price pressure resulting from the prevailing competitive environment remains a risk.

Economic and political uncertainty, as well as new emerging technologies and innovations in the marine industry, will challenge current business models and trade patterns. Reduced capital expenditure from oil companies continues to limit offshore investments, and offshore production is facing increasing competition from low cost onshore and shale production. In addition, increasing energy efficiency and the substitution of other energy sources, will challenge crude oil demand growth. The enforcement of environmental regulations and potential new regulations remain as a source of uncertainty. Climate change continues to create pressure for reducing greenhouse gas emissions within the shipping industry.

Wärtsilä emphasises a holistic approach to management of cyber and physical security risks in its internal operations and customer offerings. The company’s cyber security team carries out its operational, governance and compliance activities in line with IEC62443 and ISO 27k. Such activities include cyber assurance, risk management, detection, secure software development lifecycle, training, endpoint protection, network security, and cyber advisory services. Wärtsilä is assessing the way in which data is stored, processed and used in the company’s systems so as to comply with the upcoming General Data Protection Regulation. Cyber security is taken into consideration in this assessment.

The Group is a defendant in a number of legal cases that have arisen out of, or are incidental to, the ordinary course of its business. These lawsuits mainly concern issues such as contractual and other liability, labour relations, property damage, and regulatory matters. The Group receives from time to time claims of different amounts and with varying degrees of substantiation. There is currently one unusually sizeable claim. It is the Group’s policy to provide for amounts related to the claims, as well as for litigation and arbitration matters, when an unfavourable outcome is probable, and the amount of the loss can be reasonably estimated.

The annual report contains a more detailed description of Wärtsilä’s risks and risk management.

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