Reviewing risks in Gofore’s investor relations
Gofore comments the risks and uncertainty factors of its business on two levels, by discussing both near-term as well as mid to long-term risks and uncertainty factors on different frequencies.
Near-term risks and uncertainty factors are updated quarterly in interim and half-year reports as well as this page mainly by reviewing if anything has changed since the previous report. Interim reports and half-year reports also include a separate section on Gofore’s market outlook. Fast changes can also be highlighted as needed in Gofore’s monthly business reviews.
Gofore’s overall risks and uncertainty factors are updated as needed. Gofore’s overall risks have been updated upon transferring to the Nasdaq Helsinki Main List in 2021.
Near-term risks and uncertainty factors – February 2025
Geopolitics and economic trends
Geopolitical risks have increased globally. The direct impact of conflicts, sanctions, and restrictions on Gofore remains small. For example, the potential effects of U.S. import tariffs on customers focused on exports and economic trends may be negative.
Economic uncertainty has continued into 2025 and still affects the entire IT industry at the beginning of the year. Our outlook is based on economic forecasts indicating that the economies of Finland and Germany will grow faster than the previous year. A possible deterioration in the economic situation would negatively affect Gofore’s customers’ ability to invest in digital development, especially in the private sector.
Public sector customer market
The public sector withstands macroeconomic changes better than the private sector. Weakening of public finances and the new Finnish government’s adjusting fiscal policy may impact IT investments. However, the content of the Finnish government program and investment targets reduce this uncertainty. With the competitive situation in the public sector remaining tight, the risk of price erosion has increased.
A significant portion of public sector contracts is made under larger framework agreements. Framework agreements are fixed in quantity or otherwise time-limited, after which they are re-tendered. Significant contracts known to Gofore that will be re-tendered in the next 12 months are detailed in the Financial Statements 2024 report.
Private sector customer market
Companies are more vulnerable than the public sector regarding political situations or country-specific macroeconomic risks. Although corporate confidence in the future has improved, the contraction of order books has continued into 2024. If the outlook weakens, the risk of reduced corporate investments increases. However, in the medium and long term, digitalization remains a high-priority development agenda for companies, seen as a competitive advantage, and Gofore’s offerings provide high added value to customers.
Project risks
The share of fixed and ceiling price projects is predicted to grow, driven by tightening customer budgets. Gofore typically makes efforts to direct procurement to a target-priced model and/or a project start where a joint scope can be created. The rising share of fixed, target and ceiling priced projects creates a higher risk in the project portfolio.
DACH region business
Gofore’s business in the DACH region is still in its early stages. The integration of its operations into a single functional entity has progressed well. In particular, the weak development of the German economy has led to customer savings. If savings continue, there is a risk of business contraction, which could potentially have negative effects on personnel and key individuals.
Cybersecurity
Cyber threats have increased recently due to geopolitical uncertainty and the growing activity of state actors. At Gofore, information security is based on an ISO 27001 certified information security management system (in Germany, the TISAX information security standard) and strong cybersecurity expertise, which we also use to serve our customers. Gofore actively operates in national networks to anticipate threats directed at itself and its customers.
Gofore’s overall risks and uncertainty factors
According to the Main List transfer prospectus 2021
- The COVID-19 pandemic has had and it is expected to continue to have an adverse effect on the development of the economy in Finland and worldwide, as well as on the operating environment of the company;
- Negative societal and political developments, along with the uncertainty relating to the economy in Finland and worldwide may have an adverse effect on the company’s business and the demand for its services;
- Potential changes in the IT development of the Finnish public sector and cuts in the budgets of IT projects may have an adverse effect on the business, operating results and financial standing of the company;
- Stiffening competition in the company’s business segments may have an adverse effect on the profitability of the company and may entail a decrease in its market share;
- The company may fail in any changes to be implemented in its organisation and operating culture related to the growth and development of its business;
- The company may fail in attaining the financial targets set forth in its strategy as well as in internationalisation and execution of corporate acquisitions;
- The company’s reputation and the perceptions associated with the company comprise valuable competitive advantages in the company’s line of business, and if the company fails in managing its reputation, this may have an adverse effect on the business, operating results and financial standing of the company;
- The company may not necessarily succeed in recruiting and retaining key personnel and professional staff;
- An increase in labour-related costs may have a negative effect on the company’s overall costs and profitability;
- Data security breaches targeted at the IT systems and telecommunications connections of the company and its customers, or other data security breaches, may impair the company’s business; and
- Risks associated with the terms and conditions of customer agreements, fulfilment of the obligations under the agreements and agreement interpretation may result in compensatory or other liabilities or contesting.
From the 2022 Annual Report:
Impacts of the COVID-19 pandemic
In 2022, the pandemic became endemic, and consequently the direct effects of the pandemic have been minor in Gofore’s business within both the public and private customer sectors. Gofore’s sick leave absences remained at a higher level than before COVID and affected the company’s profitability in spring 2022. However, the number of sick leave absences did not radically increase after the winter. On the markets outside Finland that are relevant for Gofore, the COVID pandemic had a greater direct impact even in the beginning of the year, which manifested itself in Germany as a slight decline in new customer acquisition. The pandemic has contributed to investments in digitalisation being increasingly prioritised. Customers are also investing in enhancing their own competencies.
Impacts of Russia’s invasion of Ukraine
Russia’s invasion of Ukraine or the restrictions on the country continue to have little direct impact on Gofore. Gofore has no operations in Russia, Ukraine or Belarus. The conflict may have indirect impact through customers’ business risks or inflation. These risks had minor impact on Gofore in the reporting period, so Gofore continues to consider this risk low. The uncertainty and its potential market impacts are likely to continue in the near future.