Risk management

      This report is a translation of the original report in German, which is solely valid.

      Proactive risk management—as it has been understood by and regularly practiced in the voestalpine Group for many years—serves to ensure the Group’s existence as a going concern in the long term and to boost its value; it is thus key to the success of the voestalpine Group on the whole. Material risks are systematically recorded, analyzed, and assessed as part of the systematic risk management process, which is undertaken Group-wide in uniform fashion several times a year, and as part of internal control systems (ICS), which are also integral elements of the Group’s structural and workflow organization. Continuous risk monitoring ensures that appropriate measures that minimize risk can be implemented in a timely manner.

      The threat scenario involving the potential lack of natural gas and raw materials supplies on account of the political tensions arising from Russia’s war of aggression against Ukraine continued to dominate the first half of the business year 2022/23. Alternative sources of supply and transport routes were identified and enabled from the start of the Russian war of aggression in order to continue to secure the supply of relevant raw materials (e.g., iron ore, iron ore pellets, pulverized coal injection (PCI) coal, and alloys) and energy sources (such as natural gas) to our production plants (in particular the energy-intensive sites in Austria). In addition, work to build up our inventories—particularly of iron ore and coal—has continued, taking into account any price or devaluation risks. Since the business year 2022/23, the voestalpine Group has had a gas storage capacity of 1.5 terawatt hours (TWh), which can be used as needed to cover various scenarios with different production methods using this stored natural gas, taking prevailing market and supply chain conditions in the given situation into account. voestalpine is also working on diversifying its natural gas supplies by increasingly purchasing non-Russian natural gas, e.g., liquefied natural gas (LNG). Furthermore, corresponding (emergency) operating modes have been prepared at the affected production sites for energy supply shortages or for energy management; this also applies in particular to the areas of electrical energy. Regular discussions take place with the responsible internal and external experts as well as with the relevant authorities and ministries in order to be well prepared for all scenarios.

      The parameters for economic development are also almost impossible to assess, above all the duration and further course of the war in Ukraine and the corresponding political reactions. The volatility of raw materials and energy prices are further factors of uncertainty, and these are counteracted as far as possible (see Annual Report 2021/22: “Report on the Company’s Risk Exposure,” subsection “Hedging raw materials prices”). Developments related to the COVID-19 pandemic continue to be monitored on an ongoing basis, and the emergency and crisis plans that were implemented along with additional measures that were defined continue to be evaluated at regular intervals and are adapted and/or expanded as necessary in the light of new information.

      In addition to the challenges already mentioned in the risk areas of raw materials availability and energy supply, the operating risk environment of the voestalpine Group (such as failure of critical production facilities and failure of critical IT systems, decarbonization and CO2 issues, knowledge management, and financial risks) has otherwise remained largely unchanged in the first six months of the current business year, as well as compared with previous years. The material fields of risk and the associated measures to minimize risk, which were presented and described in detail in the Annual Report 2021/22 of the voestalpine Group (Annual Report 2021/22, “Report on the Company’s Risk Exposure” and “Effects of climate and energy policies—decarbonization strategy”), are therefore still valid for this semi-annual management report, including the items added to the risk areas of raw materials availability and energy supply mentioned above.

      Based on the insights gained from economic and financial crises in the past and their effects on the voestalpine Group, particularly those gained from the Russian war of aggression on Ukraine and the COVID-19 pandemic, additional steps primarily of a corporate nature have been and are being taken to minimize the Group’s risk exposure. These measures, too, are described in detail in the Annual Report 2021/22, and they have been and are being consistently pursued in the current business year.

      Given the difficulties in the economic environment that continue unabated, any fallout from global (trade) disputes is monitored on a continual basis. Further developments of the war in Ukraine and the measures adopted by the respective countries in an attempt to avert this war and activities undertaken to stimulate their economies will continue to have a massive impact on economic developments in different parts of the world.

      Specific measures to hedge the risks previously identified within the voestalpine Group have been developed and implemented. These steps are aimed at reducing potential losses and/or minimizing the likelihood of losses occurring. It must be stated that, even as of the present semi-annual management report, voestalpine believes that its operating risks over and above global crises and their ramifications are limited and manageable.