Principal risks

Customer relationships and distribution

Fiskars produces and sells consumer products; therefore general market conditions and a decline in consumer demand in key market areas in Europe and North America could have a material adverse effect on the Corporation's net sales and profitability. Fiskars' products are sold through its sales force, agents, and distributors to wholesalers, retailers, and directly to consumers through its stores. Sales to large individual customers are significant in some businesses. As some major customers decide their product range and suppliers only once annually, the loss of a small number of major customers or disruption in the activities of a specialized distribution channel could have an adverse effect on Fiskars' business and profits. None of Fiskars' customers accounted for more than 10% of sales in 2009.

Supply chain

Fiskars is making increasing use of outsourcing and working with a growing number of contract manufacturers and partners. The proportion of in-house production has declined, and the dependency on the supply chain increased. Supply chain management has become a management and availability risk, as a considerable proportion of sales in respect of some products is of a seasonal nature and an increasing proportion of total corporate purchases will be made in countries distant from the company's main operations. Risk management associated with outsourced production and ensuring product availability is being developed on a continuous basis.

Price and supply of raw materials and commodities contracts

Fiskars products are manufactured from a wide range of materials, primarily steel, aluminum, and plastic. Sudden fluctuations in raw material and energy prices can have an impact on the company's operational result. Fiskars employs long-term contracts with its raw material suppliers to minimize this; and production plants in Finland that use large amounts of electricity employ collective purchasing to hedge their operations against fluctuations in electricity prices.

Innovation

The growth of Fiskars' business depends to a significant extent on its ability to generate and commercialize a stream of new products and product enhancements that meet consumer expectations. The ability to combine design and innovation with technical R&D capabilities forms a solid basis for rolling out products successfully in a timely manner.

Brands and corporate reputation

Fiskars has a number of global and local brands in its portfolio. Any adverse event affecting consumer confidence or continuity of supply affecting these brands could have a detrimental impact on its business. Fiskars monitors the performance of its leading brands closely, and is committed to taking appropriate action to mitigate any threat to brand value.

Weather and seasonal dependence

Some product groups, particularly garden tools during the spring, can be affected by the weather. Unexpected weather conditions can have a negative impact on sales of these products. Sales of homeware products are heavily geared towards the last quarter of the year, and any negative issues related to product availability or demand during this quarter could affect the full-year result of this business significantly.

Environment

Most of Fiskars' industrial operations involve no significant environmental risks. Production facilities have up-to-date environmental permits that set clear limits on their operations. Changes in environmental directives can affect existing environmental permits. Adapting to such directives may require changes in existing production methods or investments in new equipment. Changes in production capacity or structure at some older facilities may result in additional costs as environmental requirements change. Pensions and similar obligations Movements in equity markets, interest rates, and the life expectancy of participants in some pension plans could affect the pension liabilities reported by the company. These liabilities are regarded as small, however, and the risk considered immaterial.

Associated company

Fiskars has a substantial investment in an associated company, Wärtsilä Corporation. Major changes in Wärtsilä's share price, profitability, or ability to pay a dividend would have a material impact on Fiskars.