Risks and uncertainty factors

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 – January-March 2023

Macro-economic situation

Economical uncertainty significantly grew in early 2023, but so far, has had no material impact on Gofore’s business. A prolonged negative growth or very slow recovery of the economy would negatively impact Gofore’s customers ability to invest in digital development, especially in the private sector. We are still unsure how the latter part of the year will develop.

Adding costs raised by the inflation on customer pricing was carried out successfully in 2022. A slower market with heavier competition might hamper customer price development in 2023.

Public sector customer market

The public sector is more resilient to macro-economic changes than the private sector. Weakening public economy may affect the public sector’s IT investment. Finnish parliamentary elections in April 2023 were expected to temporarily affect market activity but had very little impact on Gofore in Q1. A delay in forming a new government might have a negative effect for the rest of 2023.

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. During 2023, Gofore estimates it has one significant frame agreement that the customer is about to retender. However, Gofore believes its public sector market position continues strong and therefore sees this risk as very low.

Private sector customer market

Companies are more vulnerable to political situation or country-specific macro-economical risks. Especially Finnish export companies had on average a strong order intake in the start 2023. Gofore currently sees this risk as medium. In the mid and long term, digitalisation is high on private company agendas, and Gofore’s offering creates high added value to customers.

Talent market

Demand for skilled workforce continues high in the industry. Short-term uncertainty of the economy has slightly decreased the demand for talent, as e.g. international technology businesses and SaaS companies have slowed down recruitment and even laid off staff. Gofore continues to mitigate talent supply related risks by further developing its already strong employer brand and flexibility in work.

M&A market

Gofore intends to continue disciplined acquisitions by acquiring companies that fit its strategy. The M&A market has picked up somewhat with increased activity in companies being offered for sale. We are also seeing a slight decrease in expected valuations. Integration of acquired companies includes uncertainty. In Finland, Gofore is an experienced, valued buyer. In the new market area, German-speaking Europe, it faces a higher risk in M&A.

Geopolitical situation

Russia’s invasion and related sanctions imposed on the country continue to have very little direct impact on Gofore. Gofore has no operations in Russia, Ukraine or Belorussia. The conflict has had a negative impact on some customer businesses. Finland’s overall geopolitical risk was alleviated, as the country joined NATO early April 2023.

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.

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