Risks and business uncertainties
Trade tensions, geopolitical uncertainty, and a possible slowdown in the global economy are affecting investment decisions in the shipping industry, especially in the bulk carrier and container sectors. 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 the economic outlook. Changes in the financial landscape have resulted in challenges to securing financing for newbuilds. The continued oversupply in the market, together with low contracting volumes, has led to further price pressure. Consolidation among the major shipyards is a potential risk that might result in lower capture rates in equipment sales due to changed relationships with the shipyards. The shortage of available shipyard capacity to install and commission scrubber retrofits has resulted in delays in project deliveries. While concerns related to climate change require increasing efforts to reduce emissions within the shipping industry, uncertainties concerning developments in the regulatory environment may slow newbuild activity.
In the power generation markets, fragile economic growth, and slow decision-making related to the ongoing energy transition continue to be the primary risks for demand development. Geopolitical tensions and the implications of trade barriers are also notable challenges to the demand environment. 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 energy penetration grows. Wärtsilä emphasises a holistic approach to the management of cyber and physical security risks in its internal operations and customer offerings. In its operational and governance activities, the company’s cyber security team has continued to move towards compliance with the IEC62443 and ISO 27000 protocols. Such activities include cyber assurance, risk management and 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.