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 2023
Economical uncertainty significantly grew over the year 2023 and affected the entire IT industry, including Gofore. A prolonged negative growth or very slow recovery of the economy would continue to negatively impact Gofore’s customers ability to invest in digital development, especially in the private sector. E.g. tightening monetary policy slows down the economic recovery. Adding costs raised by the inflation on customer pricing has been mostly successful in 2022-2023.
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. Content of the new government programme, such as the decision to prioritise digital public services, partly mitigates uncertainties. On the other hand, the public finance adjustment targets may bring new uncertainties for the coming years. We keep a close eye on this through e.g. state budgets.
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. According to Gofore’s knowledge, none of its significant, existing public sector agreements will not be retendered at the end of 2023 nor in the first half of 2024, which mitigates Gofore’s public sector risks.
Private sector customer market
Companies are more vulnerable to political situation or country-specific macro-economical risks. Especially Finnish export companies have, on average, had decreasing order intake in 2023, although financial results have been strong. If order intakes should continue to weaken, there is a risk of a weaker investment ability for companies. 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.
Demand for skilled workforce has slowed down in the IT industry. Gofore’s several competitors have slowed down recruitment and even laid off staff. Gofore has also not been able to fully use recruitment opportunities due to weaker customer demand. Gofore will continue to recruit for direct customer needs for the rest of the year and continues to mitigate its talent related risk by further developing its already strong employer brand, flexible working and the wellbeing of its staff.
Gofore intends to continue disciplined acquisitions by acquiring companies that fit its strategy. The M&A market has slowed down. On the other hand, the higher cost of financing has somewhat decreased competition over targets. For Gofore, 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 M&A risk.
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.