Risks and business uncertainties
Trade tensions, geopolitical uncertainty, and an anticipated slowdown in the global economy are affecting investment decisions in the shipping industry, especially in the bulk carrier and container sectors. Access to finance is currently challenging for many owners. While slow economic growth is also a risk to demand development in the service markets, the capital-intensive newbuilding market is more sensitive to changes in economic outlook. Pricing pressure remains a concern in a low demand environment. The development of bunker fuel costs and availability remains uncertain ahead of the IMO 2020 deadline, posing a potential risk for scrubber investments. Climate change requires increasing efforts to reduce emissions within the shipping industry. However, the enforcement of environmental regulations and potential new regulations continue to be sources of uncertainty and may slow newbuild activity.
In the power generation markets, fragile economic growth and slow decision-making continue to be the primary risks for demand development. Geopolitical tensions and trade barrier implications, as well as significant currency fluctuations, can result in investment decisions being postponed in certain countries. Price pressure resulting from the prevailing competitive environment remains a risk.
Effective cyber risk management is increasingly important as cyber security has become vital to the operation and management of many safety, security, and protection systems in the shipping environment. This is also the case with the increasing importance of energy management systems as renewable penetration grows. Wärtsilä emphasises a holistic approach to the 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 the IEC62443 and ISO 27k protocols. Such activities include cyber assurance, risk management, detection, a secure software development lifecycle, training, endpoint protection, network security, and cyber advisory services.
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.