Outotec’s business activities are exposed to financial risks, including foreign exchange and interest rate risks, securities price risk, and credit and liquidity risks. Also insurances and capital management are part of financial risk management.
Credit risks, foreign exchange fluctuations and liquidity
Outotec is exposed to risks related to the liquidity and payment schedules of its customers. The risk of credit losses increases during down-cycle in the mining and metallurgical industry. The risks related to accounts receivable is mitigated through the use of advance payments and payment securities.
Outotec operates internationally and is thus exposed to risks arising from foreign exchange rate fluctuations related to currency flows from revenues and expenses, as well as from the translation of income statement and statement of financial position items of foreign subsidiaries into euros.
In the current market situation, the short-term risk and uncertainties involved may lead to decreasing headroom under financial covenants related to the capital structure and liquidity in Outotec’s main credit facilities.
Outotec Treasury is responsible for the centralized management of financial risks in accordance with Outotec’s Financial Risk Management Policy. Financial risk management is discussed in more detail in Note 18 of the Consolidated Financial Statements.