Estimate of Operational Risks and Uncertainties

Risk Management

The company follows a risk management policy approved by the company's Board of Directors. The objective of risk management is to cover risks related to business operations, property, agreements, competence, currencies, financing and strategy. Risk management aims to predict and identify uncertainties and subsequently develop the prediction of risks and the measures called for.

Risk management aims to systematically identify and recognize business-related risks and to ensure that such risks are appropriately managed and monitored. The company's risk management supports the achievement of strategic targets and ensures the continuity of business. In addition, it helps to ensure the safety of the personnel, products and services, and to fulfil statutory obligations.

Strategic and Business Risks

The company's identified risks and uncertainties include factors associated with the company strategy and associated assumptions, as well as issues related to business development. Risks associated with business include market development in a rapidly changing industry, as well as increasing competition, which, through potential decreases in market shares and prices, may have a negative impact on the development of the company's business, earnings and financial position.

In accordance with its strategy, the company aims to grow without putting its profitability and strong balance sheet position at risk. The company aims to achieve organic growth as well as growth through acquisitions. Growth achieved through acquisitions will cause separate risks associated with the takeover of the acquired business. If the company fails to successfully manage its growth, this may have an adverse effect on the development of the company's business, its earnings and financial position. The implementation of the growth strategy will also require investments in fixed assets and operating capital, and no guarantee can be given on the availability of additional third-party financing.

Operational and Personnel Risks

EB's operational risks mainly comprise content risks, quality risks and financial risks associated with the design and delivery of products and projects. EB's success depends on management and experts employed by EB as well as its ability to recruit and retain competent personnel. The loss of executive management or other key people may have an adverse effect on the business development, earnings and financial position of the company.

Product Development Risks

EB's product development and design services often concern technologically complex products and systems. Product development and design work carried out by the Corporation companies may include errors or omissions in programming or design that, despite testing carried out by EB or its clients, will only be detected once the product is on the market. There is no guarantee that errors in programming or design will not be found in software or systems designed by the Corporation companies in the future, and no guarantee that the detection of such errors will not weaken EB's own or its client's market position. Any error may also have an effect on the client relationship in question and the ability to attract new clients. Even though the Corporation companies have aimed to restrict its liability through contract procedures, a programming or design error might also lead to claims for damages. If realized, these factors could have a negative effect on the business development, earnings and financial position of the company.

Product Liability Risks

It can be expected that claims related to product liability and typical of companies in similar industries could be made against EB. Insurance policies have been taken out to cover any related claims for damages. The aim is to reduce product liability risks by developing the safety of products through, among other things, product development investments, client training and precise terms and conditions of sales contracts. The current insurance coverage is estimated to be sufficient to cover any liability risks. However, EB may have to compensate damages that exceed the insurance coverage.

Property and Liability Risks

EB has taken out global insurance schemes to prepare for property, interruption, transport and liability risks (conventional risks, product liability, and management's liability). The insurance cover comprises property, transport and liability insurance schemes and their local applications. Deductibles are dimensioned with the risk-bearing capacity of the entire EB in mind.

Raw Materials, Suppliers, and Subcontractors

The development of the global economy or sudden delivery problems with subcontractors may affect the price and availability of components used in EB's products. This may affect business operations through increased purchase prices or extended delivery times. Global business operations and a comprehensive network of subcontractors reduce the effect of local disturbances. EB aims to use long-term procurement agreements to reduce the effects of short-term price fluctuations and availability problems. The aim is to survey alternative suppliers to the extent possible in order to better manage risks associated with individual suppliers. However, this is not always possible.

Changes in the prices of energy, oil and metals may also have indirect adverse effects on EB's operations if price fluctuations reduce the investment appetite of the client industries. The Corporation companies purchase most of the components for their products from subcontractors, and alternative suppliers are not necessarily found quickly. Disturbances in deliveries by subcontractors may also impact EB's client relationships and business operations.

Intellectual Property Risks

EB mostly protects its intellectual property rights through copyrights, trademark registrations, business secrets and non-disclosure agreements. However, there is no complete certainty that EB's actions to protect intellectual property will be sufficient in all cases.

Financing Risks

EB is exposed to several financing risks during the normal course of its business. The primary financing risks comprise currency, interest rate and credit risks. The objective of managing the EB's financing risks is to reduce the effects on earnings, the balance sheet and cash flow caused by price fluctuations and other factors of uncertainty, as well as to ensure adequate solvency. EB uses forward exchange agreements, currency options and interest rate swaps for risk management. However, in spite of actions to manage financial risks, it cannot be guaranteed that currency risks, interest rate risks and credit risks will not have adverse effects on the business development, earnings and financial position of the company.

Political, Economical, and Legislative Changes in Emerging Countries

The business operations of EB, and particularly its clients, are geographically diversified. EB has manufacturing facilities and suppliers in emerging countries. The demand for new devices is increasingly concentrated in Asia. Sudden political, economic and/or legislative changes in these countries may have an adverse effect on business operations. The risk associated with emerging countries is reduced by the extensive geo-graphical scope of EB's business operations, the variety of client industries and more stable aftermarket business operations in Europe and North America.