Page 97 - Vaculug Sustainable Report 2022

to improve continuously in this field taking into account both internal and external risks related.
For example, in relation to local water resources where the Company has manufacturing plants, risks with reference to water absence, scarcity, drought, local law restriction, etc. were identified, dedicated alternative projects and action plans is developed and foreseen, as well as related investment.
Risks related to raw
materials availability and price trends
Given the global macroeconomic situation and their impact on the cost of the finished product as well as the strong volatility recorded in recent years, synthetic rubber, natural rubber and oil related raw materials would continue to represent a factor of uncertainty.
Considering different scenarios, sales price increases and/or the different internal cost efficiency recovery measures, such as use of alternative raw materials, switch of source/supplier, process quality improvement and waste level, would be relevant to protect the Company’s asset and profitability.
Risks linked
to the competitive positioning
The Company operates in the market characterized by the presence of numerous operators, some of which with meaningful financial and considerable industrial resources and brands that enjoy a significant level of international or local notoriety. Vaculug is the only tyre company solely focused on the Industrial sector (transport of goods and people), the Agro and OTR segments, “Tire solutions for professionals”. This may bring high barriers to entry in terms of technology and production. Added to this
continuous research and investment is the heart of the technology development to create and product innovative offers, products and services.
STRATEGIC RISKS Exchange rate risk
The Company is exposed in exchange rate risk
as manufacturing and commercial activities are performed in diverse geographic areas, receivables and payables are in foreign currency. Company’s operations and profitability may be affected by changes in the exchange rates volatility between currencies, due to the conversion into euro of the
assets and liabilities of local companies operating in currencies other than the euro. Currencies fluctuation and related exposures to exchange rate risk are constantly monitored by the Company.
Specifically, Vaculug has industrial footprint in
the countries (Brazil, Egypt, Turkey) which suffer fluctuation of the currencies. For instance, in order to minimize the impact, dedicated actions and projects were studied and developed aiming to neutralize the economic and financial impacts.
Credit risk
Credit risk is defined as the potential loss arising from the non-fulfilment of commercial and financial obligations and undertaken by counterparties, as foreseen in agreements.
In order to limit the risk, the Company has put in place dedicated procedure to define credit limit to
be assigned to customers, to monitor expected cash flows and to take any recovery action if necessary. Moreover, other instruments are used for this end, for example other typology of guarantee (authorization is requested), master agreement has been put in place with insurance company for worldwide coverage of credit risk, periodic review and renew are performed aiming to have the coverage in line with the business model as well as the macroeconomic outlook.
Risks associated with human resources
The risk of loss of human resources in key positions or in possession of critical know how is in place for the Company.
Vaculug develops and adopts retention plan considering general macroeconomic scenario and salary benchmarks of each country, related updates are periodic performed due to continuous changes
of the latters to address the risk. Moreover, skill & knowhow mapping is foreseen to manage it properly. Incentive plans and specific non-compete agreements are set and defined taking into account the risk profiles of the activities of the business. Lastly, a specific talent program is planned to be developed and implemented to motivate and retain talent.
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