Risks
Description of the risks and uncertainties that are considered significant for Tokmanni Group
| Risk | Description of the risk | Risk management plan |
| Competitor and market risk | The financial result and profitability of Tokmanni Group’s business are affected by consumer behaviour and actions of competitors operating in the Nordic retail market. New international market forces and online shopping are reshaping the industry and market dynamics, creating pressure and potentially intensifying competition in Tokmanni Group’s core markets in Finland, Sweden and Denmark. New entrants may attract customers away from the Group. | Tokmanni Group continuously monitors the market as part of its daily business management. The Group develops its business processes and services and adapts sales promotion activities and pricing strategies to respond to changing market conditions. |
| Weak assortment management | If expertise and the assortment management process do not function optimally, it may result in reduced sales and margin. | Tokmanni Group has established assortment strategies, which are implemented according to plans. Processes and operating models are developed as needed. In addition, care is taken to ensure that employee competence is sufficient. |
| Economic fluctuations | Changes in the international or domestic economic situation may increase the prices of transport, components, energy and materials, and even lead to shortages. If price levels remain high, component shortages, disruptions in electricity distribution and supply chain disturbances can delay deliveries, reduce product availability and cause additional costs, which cannot be fully transferred to customer prices. The impact of an economic downturn on discount retail is smaller than on other retail sectors, but it significantly affects demand for more expensive products. | Tokmanni Group closely monitors economic developments and seeks to take economic fluctuations into account, particularly in its resource planning and purchasing and supply chain operations. |
| Inventory turnover and working capital management | Tokmanni Group aims to improve its working capital management by developing processes and tools in procurement, supply chain management and category management. If the Group fails in managing working capital, it may have negative effects on the company’s financial position and profitability. | Tokmanni Group constantly monitors import-related transport, inventory turnover, product lifecycles and disposals, as well as assortment management as part of its daily business management and takes corrective actions when necessary. |
| Commercial risk related to acquisitions | Acquisitions involve risks, such as compatibility and harmonisation of systems and processes, as well as the integration of sustainability work, sourcing and buying activities and employees. Failure in these areas may hinder the achievement of the required level of responsibility and financial targets. | Tokmanni Group has developed operating models and allocated Group-level resources to actively support acquisitions and integration. External advisers are utilised for the assessment of possible acquisition targets and related transactions. |
| Geopolitical changes and sourcing risks | Direct and indirect risks are associated with uncertain global economic conditions and geopolitical developments, such as slower-than-expected economic growth and potential unexpected political decisions. These factors may have an adverse effect on Tokmanni Group’s business and demand for its products. In addition, the Group’s sourcing markets are subject to changes beyond its control. China’s evolving environmental legislation, the impact of political decisions on the country’s economic development and legislation, and political instability in sourcing countries such as Turkey, Bangladesh, Myanmar and Pakistan may lead to increased sourcing prices or supply disruptions. Tokmanni Group’s joint venture with Europris acts as a sourcing channel for almost all goods from Far East. The possible termination of the sourcing cooperation may result in additional costs for the Group and increase the purchase prices of its products. | Tokmanni Group continually assesses risks by monitoring changes in the geopolitical situation and prepares for possible changes with appropriate plans and measures. The Group also invests increasingly in the development of its sourcing models, enabling flexible adjustments in sourcing and buying should risks materialise. |
| Failure of strategic projects | The implementation of Tokmanni Group’s strategy and strategic transformation requires new capabilities and skilled personnel. If the employees’ expertise is not sufficient, strategic projects may be delayed or fail entirely, which could slow down sales growth and profitability. | Each Tokmanni Group project has its own steering group and sponsor responsible for the implementation of the project and its risk management. Progress is monitored and deviations are addressed. Progresses of different projects are reported to the Board of Directors. |
| Brand image and marketing risk | Strong brand and price image are among the cornerstones of Tokmanni Group. Improving these requires successful marketing investments. If marketing does not succeed as desired, the Group’s brand image may weaken, resulting in a decrease in sales volumes and profitability. | Brand image and marketing risk are managed by consistently steering brand and price perception as part of Tokmanni Group’s strategy, and by planning marketing activities based on data and customer insight. Marketing investments and the effectiveness of campaigns are monitored regularly, and swift actions are taken, when necessary, based on the results. Customer and perception surveys, along with continuous monitoring, aim to ensure that marketing supports sales volumes, profitability and the long-term strength of the brand, while minimising potential reputational damage. |
| Personnel risks (matters relating to employee health and working capacity) | Extensive absences among Tokmanni Group personnel in various employee groups (e.g. logistics, sales, customer service, management) may affect the Group’s operations. Increased sick leaves lead to additional costs, slows down the Group’s operations and reduces operational quality, which may result in weakened results and increased expenses. | Tokmanni Group seeks to minimise personnel-related risks through various safety measures and, where necessary, specific guidelines such as remote working practices. The Group can also hire temporary employees during a potential rise in illness levels. |
| Skills and availability of personnel | If Tokmanni Group cannot recruit qualified employees, the Group’s operational capacity may weaken. If employees cannot be kept motivated and continuously trained to meet growing work-life demands, it may impair the Group’s operations. In addition, strikes may significantly hinder operations and cause financial losses. | Tokmanni Group provides regular training for its employees and continuously strives to enhance its employer image. The Group has, among other things, identified key personnel in various functions and planned deputy arrangements for them. |
| Product quality, sustainability and reputational risk | If, for example, Tokmanni Group’s product safety monitoring fails or the assurance of sustainability in the supply chain is compromised, the result may be financial loss and a weakening or loss of customer trust. The importance of sustainability perspectives, responsible production and sourcing and buying of products, and fair and equal treatment of employees is increasingly emphasised for stakeholders. Possible failures in implementing sustainability perspectives could result in negative publicity and affect Group’s reputation. | The Group manages reputational risks through internal and external quality and sustainability audits, requirements to comply with amfori BSCI Code of Conduct and ethical principles, good governance and Group’s management models, as well as through internal audit procedures and a comprehensive compliance programme. In addition, the Group-level quality team monitors product safety and quality in the country of origin, at warehouses and in stores. |
| Environmental risks | Extreme weather conditions such as hurricanes and floods may affect, for example, Tokmanni Group’s supply chain and suppliers’ production and storage facilities. Growing awareness and concern about climate change, as well as increased awareness of more sustainable consumer behaviour, may change customer purchasing patterns. | Diversifying the supply chain, identifying alternative sourcing channels and proactive preparedness help reduce disruptions caused by extreme weather conditions. The Group responds to customers’ growing environmental awareness by developing more sustainable product ranges, enhancing transparent communication and monitoring changes in consumer behaviour to ensure that the business remains competitive and sustainable in the long term. |
| Supply chain disruptions | Disruptions in the supply chain may delay product deliveries to Tokmanni Group’s stores or to the online shops, which can have a significant impact particularly on the sale of seasonal products. Likewise, the absence of campaign products may lead to lower sales and loss of customer trust and satisfaction. | Tokmanni Group manages supply chain disruption risk by diversifying its sources and supplier base, and utilising alternative sourcing channels. Deliveries, inventory turnover and product availability are continuously monitored as part of daily business management to allow timely responses to deviations. In addition, the Group develops its sourcing and buying, and logistics processes, conducts supplier and production audits and prepares for exceptional situations with proactive planning. |
| Data security risks | Dependence on data systems, data transmission and external service providers has increased. The integration of networks, outsourcing of services and online stores all require ever more effective monitoring of data security. Prolonged disruptions in data systems, payment transmission or elsewhere in the supply chain, or other exceptional situations, such as a cyber-attack, can paralyse the Group’s operations or halt the flow of goods throughout the Group, causing significant sales losses and a weakening of customer trust. | Tokmanni Group manages risks related to data systems, data transmission and external service providers by developing data security monitoring, preparing for system and service interruptions, and monitoring operational reliability as part of daily management. The Group invests in proactive risk identification, preparedness for exceptional situations and rapid management of disruptions to ensure business continuity, payment transmission and the flow of goods even in the event of disturbances. |
| Changing legislation and ability to respond | Changing legislation continuously imposes new obligations and requirements. If Tokmanni Group cannot respond to these, it may affect the Group’s ability to conduct business. | Tokmanni Group manages the risk related to changing legislation by actively monitoring developments in the regulatory environment and ensuring that the Group’s operating models and processes meet new obligations and requirements. The impacts of legislative changes are assessed proactively to safeguard the Group’s ability to conduct business. |
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