Opportunity and Risk Report
In connection with risk management, special attention is paid to opportunities and risks that are not explicit elements of planning.
Important aspects result from TÜV Rheinland’s global orientation and primarily relate to customers and markets and to legal and political framework conditions.
Externally oriented opportunities are mainly associated with service innovations in individual Business Streams and Fields. Prominent examples of this are new services in connection with climate neutrality, e-mobility, supply chain services, and innovative services for the photovoltaic sector. Increased acquisition of large-scale orders such as support for large-scale plants and infrastructure projects offers further potential. Here, too, additional opportunities open up through the option of offering customers a comprehensive package of services in a global network. As a result, market-related risks are compensated for such as declines in demand due to regulatory changes or a downturn in certain sectors like photovoltaics.
Development of New Markets
Major opportunities also continue to exist in the ongoing dynamic development of international markets. By being present in other markets with strong growth – such as Brazil, China, and India – and continuous expansion of the range of services in developing countries, further protection is developed. At the same time, the global position ensures a certain balancing of risks with regard to economic crises that may occur in individual countries and regions.
In addition to developing markets that are currently being attended to, penetrating new markets is also given special significance. Apart from other Asian countries, these include the Persian Gulf. Developments in both directions will be systematically supported by increased M&A activities. Targeted acquisitions offer further potential through structured integration. The overall resulting network, which will follow globalized value chains even more closely, also forms one of the most important columns of Strategy 2017.
It will be implemented within the established matrix structure. The institutionalized, close coordination between business-specific and regional expertise results in additional opportunities – for example, in identifying new fields of activity and the effective and efficient handling of projects and services.
Reduction of complexity in all areas opens up further potential in the form of a lean management approach. In addition to optimizations in the sales and administration area, this particularly includes the pooling of operating activities and the use of unified IT applications according to customer wishes. Finally, optimized project management can help reduce risks in implementing internal and external development projects and large projects.
The business opportunities that arise for TÜV Rheinland from the growing importance of corporate social responsibility in companies around the world are discussed in the section on Value Management and Business-Relevant Environmental and Social Factors.
Legal Framework Conditions
Relevant risks naturally first arise from changes in the legal framework conditions. Liberalization steps can result in challenges in markets due to rising competitive pressure. One example is Spain for the Mobility and Industrial Services Business Streams. Nevertheless, this also helps to open up additional potential by providing an opportunity for supraregional operations. In Germany, the Mobility and Industrial Services Business Streams show that a systematic market and service offensive in saturated markets is a suitable means of ensuring survival in the face of competition.
Risks may arise from own business activity as well as through external factors. In the case of the French company Poly Implant Prothèse’s (PIP), TÜV Rheinland was mentioned as Notified Body in connection with conformity assessment procedures according to the European Medical Devices Directive for CE marking. PIP had continually deceived TÜV Rheinland in that they were using a silicone gel to produce its implants that was not approved for that purpose. Immediately after obtaining knowledge of the fraud, TÜV Rheinland suspended its certification and initiated legal action against PIP. In 2012, claims were asserted both judicially and extrajudicially. According to TÜV Rheinland’s legal opinion, these claims are unfounded, as there is no conduct giving rise to liability.
In Germany, in addition to general economic risks, exempting educational services from the value-added tax can have a deleterious effect on the area of Professional Training. This risk is countervailed by potentials from an even stronger interconnection of sales-related and administrative processes following the acquisition of the campus Group. Furthermore, opportunities exist due to additional growth in defined foreign markets.
Economic Framework Conditions
General imponderables exist with regard to the stability of international finance systems and possible effects on the economy. In this regard, the high and still-rising proportion of international sales has a risk-reducing effect. This is also true for political instabilities, as are currently occurring in the Near and Middle East. Moreover, progressive consolidation in the TIC industry combined with pressure on prices and margins and fiercer competition pose an ongoing challenge.
In Middle and Eastern Europe, ambitious growth and yield targets continue to face relatively difficult economic framework conditions which are countervailed by strategic and operational changes. However, a change of this kind will at least temporarily involve a risk of falling margins.