Risks related to business operations and the industry

Due to the Covid-19 pandemic, the weakening of the economic environment may result in a decrease in the solvency of our clients, which could have a negative impact on the company’s performance.

Risk management

The company aims to reduce the negative impact of Covid-19 on its operations e.g. by focusing on products and services that have remained profitable despite the development of the pandemic, and by developing new products and services that reduce dependence on individual products.

Credit loss risk

The most important risks related to the company’s operations are possible credit losses arising from unsecured consumer loans. The company may not be able to fully assess the credit rating of its customers, which may result in credit losses. In addition, the solvency of the company’s clients may decrease, which may result in an increase of credit losses. If the company’s loan loss provisions are not properly proportionate to the amount of losses, it may have a negative effect on the performance and financial situation of the company.

Risk management

The company has taken into account the risk of credit e.g. in the pricing of its products. By doing so the company aims to ensure that the price of the products reflects the risks associated with the loans granted and covers any losses that may arise. Before granting loans, the company strives to ensure the customer’s creditworthiness and solvency by checking e.g. credit scores as well as salary and credit information. Customers’ solvency is assessed comprehensively by using different types of assessments. The company also manages credit loss risk by selling uncertain loan receivables to debt collection agencies, which frees up capital and limits the risks associated with granted loans.

The financial services industry is a highly competitive environment and increased competition may reduce the demand and profitability of the company’s services. The company may not be able to provide the services or products desired by the customer base. The company’s reputation may be damaged, which may have an adverse effect on the business and its profits. The company may fail to control growth and maintain its profitability as the business grows.

Risk management

The company constantly monitors changes taking place in the competitive environment and customer demands while it strives to adapt its operations based on those changes. The company also invests in improving its brand by e.g. targeted marketing measures and campaigns.

Liquidity risk

The company may not be able to generate sufficient liquid assets to maintain its liquidity and may not be able to increase its operations due to a lack of liquid assets.

Risk management

The company strives to manage risks related to liquidity by e.g. supplementing or replacing its financial structure with either debt or equity instruments. A decentralized and diversified funding base reduces e.g. risk associated with preference shares or debt financing. In addition, the company sells uncertain loan receivables to collection companies to improve its short-term liquidity. The company strives to manage the liquidity risk related to the growth of its business, by e.g. anticipating the development of sales and planning sales promotion measures according to developments.

The company operates in the financial services sector which is an industry heavily affected by laws and regulations. Those regulations may affect the company’s operations related to lending, interest rates, securities markets, and, taxation, which are controlled by regulations and other political activities. In addition, legal risks may have an adverse effect on the company’s operations. The company may fail to fulfill different regulations and the company may face legal difficulties when expanding to other markets.

Risk management

The company continuously monitors laws and regulations affecting the financial sector in order to predict the changes and to develop and adapt the required changes in its operations.

Technology risks

Failure or significant disruption of GF Money Consumer Finance’s technological infrastructure, possible programming errors, problems with the maintenance or development of IT platforms, databases or analysis tools, or problems with third-party technology used by the company, could adversely affect GF Money Consumer Finance’s business.

Risk management

The company is constantly developing its technology platform and strives to ensure that the functionality of the business is fully protected by possible technology outages or failures.

Other risks

The economic and financial market instability in Finland, Sweden, Denmark or Spain or a financial instability affecting these countries may adversely affect the company’s operations, loan receivables, profits, financial situation, liquidity and sources of capital.  In addition, an overall unfavorable economic situation may increase risks to the company’s operations. Some of the company’s foreign subsidiaries operate outside the euro area, which may pose the company to foreign exchange risk.

Risk management

The company actively monitors the development of its operating environment and actively adapts its operations to changes in different markets.

Economical and financial risks

Economical risks

There is no certainty that the company's operations will yield profit or that the company's cash flow will be positive in the future.

Potential credit losses may adversely affect the company's financial situation. Changes in market interest rates may have an effect on the company's business and profit.

Risk management

The company practices long-term business planning and develops its business around profitable products and services.

The company also monitors the development of its financial situation on a daily basis. The company publishes its balance sheet and income statement regularly allowing people to assess the company’s financial situation.

The reporting of the company's financial figures is supervised by the company's auditor, PricewaterhouseCoopers (PwC).

Financial risks

The company's operations involve risks related to the availability of financing. The company may not receive the financing it requires, or it may receive it on unfavorable terms. The company is also exposed to the risk of potential unavailability of its current financing channels which would require the company to look for alternative forms of financing.

The Covid-19 pandemic may also have a negative impact on the company's access to financing.

Risk management

The company constantly anticipates the development of the business and its need for financing. The company is in active discussions with both existing and new financiers to ensure the availability of various financing options when needed.

Risks of investing in shares

The investor may lose some or all of the invested capital.

Investors may not receive a return on their investment.

There is no certainty that the company will distribute dividends on shares in the future.

Risk management

The company aims to develop its business and the value of its shares in the long term, which will improve the chances for a positive return on shares and dividends.

Remarks

Equity investments in the company are investments in equity, which means that dividends can only be paid if the company has distributable funds (unrestricted equity).

Preference shares are the company's equity and the provisions concerning the return of equity apply to their return. According to Chapter 13, Section 2 of the Companies Act, funds may not be distributed in case the company is insolvent or if the fund distribution will result in insolvency.