Risk management

Most significant risks

KONE is exposed to risks that may arise from its operations or changes in the operating environment. The most significant risk factors described below can potentially have an adverse effect on KONE’s business operations and financial position and, as a result, on the value of the company. Other risks, which are currently either unknown or considered immaterial to KONE may, however, become material in the future.

The assessment and analysis of KONE’s most significant risks also covers non-financial risks. In line with the requirements of the Finnish Accounting Act, KONE has identified the most significant non-financial risks regardless of their materiality for KONE. In addition, KONE applies the guidelines of the Task Force on Climate-Related Financial Disclosures (TCFD) on the reporting of climate-related risks.

Read more about KONE's most significant risks in the latest interim report and annual review.

Risk management

RisksMitigation actions
Weakening of the global economic environmentKONE strives to continuously develop its competitiveness in all regions and businesses. KONE has a wide geographic presence, global manufacturing capabilities and supply network, as well as a balanced business portfolio with a high share of Service business.
Geopolitical tensions impacting the competitiveness of KONE’s supply chain, leading to increased costs or causing potential disruptionsKONE actively monitors the development of the applicable and relevant regulations, policies and trade rules, prepares for alternative scenarios and evaluates the competitiveness and viability of KONE’s supply chain and sourcing channels. KONE is taking actions to mitigate the impact of tariffs, for example by applying for tariff exemptions when applicable. KONE also applies increased scrutiny over business operations that may be affected by international trade restrictions or other geopolitical actions.
Changes in the competitive or customer landscape, customer requirements or competitors’ offerings impacting KONE’s competitivenessKONE aims to be the industry leader with its competitive offering by investing in research and development and by taking an open innovation approach. KONE also closely follows emerging industry and market trends and actively monitors opportunities for industry consolidation.
Increasing material, fuel and/or logistics costs weakening KONE’s profitabilityKONE aims to offset cost increases by improving the margin of orders received and adopting dynamic pricing and contract models which allow KONE to pass on increased supply costs. Improving pricing, securing productivity gains and lowering product costs remains high on KONE’s agenda.
A failure to secure and develop the needed organizational capabilities and competenciesKONE continuously evaluates the skills and competences required for the execution of the selected strategy and develops and/or acquires these from internal talent pools or externally. KONE also has extensive training programs in place to develop and retain critical talents.
Risks related to component and subcontracted labor availabilityKONE’s sourcing processes aim to identify critical suppliers and supply categories and implement alternative sources, long-term agreements, last-buy options and other measures to ensure the availability of the supply. KONE has also developed multinational subcontractor pools to ensure subcontractor capacity on a regional level. Subcontractors’ competences and capabilities are monitored and developed continuously, similarly as with own employees. The semiconductor market is monitored and the risk of shortages managed with dual sourcing and active involvement of supply chain partners among other actions.
Product integrity, safety or quality issues as well as issues with reputationTo mitigate product risks, KONE has strict quality control processes for product design, supply, manufacturing, installation and service. In addition, KONE aims for transparent and reliable communication to prevent reputational risks and to manage potential incidents. KONE also has stringent corporate governance principles in place.
Interruptions to KONE’s or its suppliers’ operationsKONE actively develops business continuity management capabilities to reduce the impact and likelihood of disruptions within its supply chain. Furthermore, KONE monitors the operations, business continuity management capabilities, financial strength and cybersecurity of its key suppliers. In addition, KONE aims to secure the availability of alternative sourcing channels for critical components and services. KONE also has a global property damage and business interruption insurance program in place. KONE’s global supply chain helps mitigate the risk of interruptions. KONE has 10 manufacturing facilities in 7 countries, multiple distribution centers and a large supplier network across the globe, which helps to mitigate the impacts from potential disruptions in individual locations or countries.
IT system interruptions and cybersecurity risksKONE’s cybersecurity management system is certified according to ISO 27001. KONE’s security policies define controls to safeguard premises, information and information systems which are both in development and in operation. The controls apply to both KONE’s internal IT systems and customer-facing digital services. KONE works with third-party security service providers and trusted technology partners to manage the risks and to detect cybersecurity incidents and to respond and recover in a timely manner. KONE conducts tests, reviews and exercises to identify areas of risk and to ensure the appropriate preparedness. The company continues to invest in its cybersecurity capabilities based on these findings. KONE also has a global cyber insurance program in place.
Financial risksKONE applies centralized risk management in accordance with the KONE Treasury Policy. More information on financial risk management can be found in notes 2.4, 3.2 and 5.3 of KONE’s Financial Statements 2023.

Risk management responsibilities

The aim of risk management at KONE is to identify the risks and uncertainties related to the achievement of KONE’s objectives, assess the likelihood and magnitude of the risks and opportunities and to identify necessary actions to mitigate the negative impacts of identified risks.

KONE’s Global Risk Management function develops, coordinates and facilitates systematic risk management integrated into KONE’s core business processes and decision-making. KONE’s business units are responsible for identifying, assessing and managing risks that can threaten the achievement of their business objectives as part of KONE’s strategic planning and budgeting processes.

Key risks are reported to the Global Risk Management function, which consolidates the risk information to the Executive Board. Executive Board members for Areas and global functions are owners of the key risks and opportunities relevant to the objectives of their organization. The Executive Board reviews and approves the Risk Management Policy and approves KONE’s risk tolerance. KONE’s Board of Directors approves the risk management principles of KONE and is responsible for monitoring and evaluating the effectiveness of KONE’s risk management systems. The Board of Directors also reviews key risks and risk treatment action plans and acts, when necessary, on key risks reported to the Board.

Internal control procedures over financial reporting

KONE’s internal control and risk management related to financial reporting is described in the Corporate Governance Statement.

Read more in the Corporate Governance Statement 2023

We use cookies to optimize site functionality and to give you the best possible experience while browsing our site. If you are fine with this and accept all cookies, just click the 'Accept' button. You can also review our privacy statement.