Risks and uncertainty factors
Peab’s business is exposed to several different types of risks but Peab’s four business areas, operations in four countries and customers in both the private and public sectors provide the foundation for spreading risks well. Some risks are out of Peab’s control but can have various impacts on the conditions for running a business. These are, for example, developments in the economy, interest rate trends, customer behavior, climate impact and political decisions. There are other risks Peab can in different ways affect by reducing their impact or eliminating them entirely. These are primarily risks in operations that are handled in the line organization in the business areas based on established procedures, processes and governance systems. Group risks are divided into four risk categories: operative risks, financial risks, strategic risks as well as compliance risks.
There are always operative risks in a project-related business like Peab’s and managing these risks is a continuous process due to the large number of projects the Group is always starting up, carrying out and completing. Peab’s project operations work with a number of different contract forms where risk levels vary depending on the type of contract. However, with any type of contract ambiguities can arise concerning the terms, which can lead to delimitation issues that create a dispute with the customer.
Financial risks are primarily associated with the company’s need for capital, tied-up capital and access to financing. Financial risks are managed on Group level.
Strategic risks are risks linked to our mission, our long-term targets and our strategy. The increasing geopolitical unpredictability contributes to a more cautious market and uncertainty concerning investments, inflation and economic development in general. Higher uncertainty impacts the construction industry regarding investments and how prices and access to materials and energy evolve. We constantly work on developing our employees, construction methods and new climate smart construction material in order to meet market needs.
Compliance risks concern, for example, lack of compliance with laws, contracts or internal regulations and guidelines. Other examples are involvement in corruption or improper competition. Compliance risks are not only found in Peab’s own organization but in our supply chains as well. The consequences of compliance risks include fines, damaged trust, failed projects and exclusion from procurements.
A decision in the case between Peab and Unibail-Rodamco-Westfield regarding the contract for Mall of Scandinavia in Solna was handed down in Peab’s favor on June 30, 2023. Thereafter Unibail-Rodamco-Westfield petitioned the Swedish Court of Appeal to set aside the judgment in its entirety in a so-called protest action. After a thorough legal trial through arbitration lasting nearly seven years Peab cannot see any grounds for a protest action. In the further process Peab will counter the protest action. During the process the arbitration judgement is suspended and thereby unenforceable, which defers the time of payment. Svea Court of Appeal is expected to hand down a judgement regarding the protest action during the second quarter 2025.
For further information about risks and uncertainty factors as well as on the arbitration judgement concerning Mall of Scandinavia, see the Annual and Sustainability Report 2024.