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 – October 2024
Macro-economic situation
Uncertainty of the economy has prolonged and affects the entire IT industry throughout 2024. According to economy forecasts, the Finnish economy will return to a growth curve in 2025. Potential weakening of the economic situation would have a negative impact on Gofore’s customers’ ability to invest in digital development, especially in the private sector.
Geopolitical uncertainty remains high.
Public sector customer market
The public sector is more resilient to macro-economic changes than the private sector. Weakening of the public economy and the adjusting finance policy of the new Finnish government may, however, affect the public sector’s IT investment. Content of the new government programme, however, mitigates this uncertainty.
A sizeable share of assignments from the public sector are given within larger frame agreements. Frame agreements are quantitative or otherwise time limited, and retendered as they are or in another form. Gofore’s significant, existing public sector agreements that are due to be retendered in the next 12 months according to the company’s knowledge are listed in the interim report.
Private sector customer market
Companies are more vulnerable to political situation or country-specific macro-economical risks. Finnish export companies’ results have continued on a satisfactory level in 2024, but order intakes are largely behind expectations. Should this outlook become weaker, there is a growing risk of decreasing investments.
However, in the mid and long term, digitalisation is seen as a competitive edge and high on company agendas, and Gofore’s offering creates high added value to customers.
DACH market
Gofore’s business in the DACH area is still in its early stages. Integration from separate parts into one entity is still ongoing. There are risks involved in the solidifying and integrating the business, and if materialised would hinder the targeted development of the business. Such risks are related to e.g. customer acquisition, staff and key people.
Talent market
Demand for skilled workforce has slowed down in the IT industry due to the market situation. Several industry companies have laid off staff or slowed down headcount growth. This has resulted to less competition of talent than before. We think it’s very likely that this is a temporary situation and the competition on talent will return. To prepare for this, avoid overly high attrition and to ensure adequate recruitment, we continuously develop Gofore’s already strong employer brand, flexible working and the wellbeing of our staff.
M&A market
Gofore intends to continue disciplined acquisitions by acquiring companies that fit its strategy. The M&A market has had less activity of late, and valuation levels have not matched. High interest rates have somewhat decreased the competition on targets. There has been a moderate increase of activity of the M&A market in 2024. There are risks involved in the integration of made acquisitions, mitigated with pre-designed integrating models.
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.