Risk and risk management
Like all business operations, Cell Impact's operations are associated with risks. Risks are something that can affect the business negatively, but if handled correctly can also add value. How risks are managed is therefore of great importance.
Uncertainty regarding future market developments
Uncertainty regarding future market developments
The company develops, manufactures and markets flow plates, primarily for use within the fuel cell and hydrogen industry, and pursues compatible activities. The company’s innovative technology has many areas of application and at present, the production of flow plates for fuel cells is the foremost of these. There is a risk that Cell Impact’s flow plates and manufacturing methods will not be widely accepted in the market. The market may come to prefer other more established technologies, and other new technologies may be developed. Also, market segments may develop more slowly or not develop as well as Cell Impact has assumed in its priority of customer segments.
The market for hydrogen may also be affected by political decisions in the energy sector in ways that Cell Impact has not anticipated. It is unavoidable that assessments of future market developments entail uncertainty regarding factors that Cell Impact cannot control, and it is impossible at this stage to know how large a market share Cell Impact is likely to gain in the market for flow plates for fuel cells. It cannot be ruled out that the fuel cell market could develop in a way that is not favorable to Cell Impact due to to changes in behavior with uncertainty regarding factors that Cell Impact cannot control, nor is it possible at this stage to know how large a market share Cell Impact is likely to gain in the market for flow plates for fuel cells. It also cannot be ruled out that the fuel cell market may develop in a direction that is unfavorable for Cell Impact due to changed behavior among other operators and end customers, technological developments, environmental aspects, structural transactions, political decisions or other external factors. Such a course of events may undermine Cell Impact’s position and have a negative material impact on Cell Impact’s operations and performance.
Suppliers and partners
Cell Impact is dependent on third parties and can only deliver its products if input goods/components and services (for example, transport) are available from these parties and if the parties meet the agreed requirements on quantity, quality and delivery dates. The lack of availability for certain components and transport services has, for example, been a consequence of the Covid-19 pandemic and war in Ukraine. Cell Impact has not yet seen any direct impact from the war in Ukraine. However, it is not unlikely that raw materials and energy prices as well as the availability of components may be affected, depending on how the conflict continues to develop. Incorrect or missed deliveries from suppliers or carriers may lead to Cell Impact’s production being delayed or deliveries not being possible, which in the short term may result in reduced or no sales. If current or future external parties do not meet their commitments or deliver within the expected time frame, ongoing production and sales may be disrupted, delayed or completely suspended, which could have a negative impact on Cell Impact’s sales, financial position and future prospects.
Dependency on key people and employees
Cell Impact has a relatively small organization and is dependent on the Board, Management Team and other key people’s knowledge, experience and engagement. Cell Impact’s ability to recruit and retain such people depends on several factors, some of which are outside Cell Impact’s control, for example, competition in the market. The loss of a senior executive or key person due to a resignation, for example, may lead to a loss of key knowledge, the inability to meet set goals or a negative impact on Cell Impact’s business strategy. If existing key people leave Cell Impact or if Cell Impact is unable to employ or retain qualified and experienced management or key people, there may be interruptions or disruptions in the company’s development and growth.
Dependency on customers
Cell Impact currently has a limited number of customers and the ability to generate orders is therefore mainly limited to these. Cell Impact’s sales and performance may be adversely affected if one or several customers choose to terminate their development efforts, became insolvent or choose a different supplier.
Competition
There is a risk that an extensive investment in developing products and methods within the same area in which Cell Impact operates, by one or more competitors, could have a negative effect on Cell Impact’s sales. In addition, there is the risk that competing products may prove to be more efficient, safer and/or less expensive than the products that Cell Impact develops and manufactures. Competitors with significantly greater financial, technical and human resources may also drive more efficient development, manufacturing and sales processes. Cell Impact’s competitors may also have access to greater capacity for marketing and distribution than Cell Impact. In the event that Cell Impact is unable to adapt its operations and products to the market’s requirements for performance and demand, there is a risk that Cell Impact may not or will not be able to maintain the competitiveness required to achieve success in the market. This in turn can have a significant negative impact on Cell Impact’s operations, financial position and performance.
Technological development risk
The market for and the technical development of flow plates for the fuel cell and the hydrogen industry as a whole may undergo rapid and significant changes. This could lead to technical problems, which means that more time may be needed to develop and manufacture products, leading to delays in getting products to market. If the company’s production is delayed or completely absent as a result, this may mean a reduction in or no sales, which may have a significant negative impact on Cell Impact’s operations, financial position and performance.
Product and service risk
Cell Impact’s products and services are generally supplied within the scope of customer-specific development in close cooperation with the customer. This cooperation is based on the parties solving any technical problems in consultation. In the longer term, Cell Impact intends to deliver products where technical performance is guaranteed. In the event that Cell Impact’s products contain errors or deficiencies, this may lead to liability for damages, which could have a significant negative impact on the company’s operations, financial position and performance.
Ability to manage growth
Cell Impact’s operations may grow substantially due to a sudden and unexpected increase in demand for the company’s products, which could make significant demands on the management as well as on operations and financial infrastructure. As the number of employees and the company’s operations continue to grow, Cell Impact must implement efficient planning and management processes to carry out its business plan effectively in a rapidly evolving market. The Board of Directors is aware that a rapid and strong market response may lead to delivery problems for the company.
If Cell Impact cannot handle this, it may have a negative material impact on the company’s operations, financial position and performance. The company intends to significantly increase its production by, among other things, expanding its production opportunities. There is a risk that such an expansion of production may be delayed or more costly than the company has calculated. In addition, there is a risk that, in the event of increased production, it may not be possible to maintain the same high quality that the company currently has for its products. There is also a risk that the company may not succeed in achieving the capacity that is planned, or that production may not be as cost-effective as planned, which could have a significant negative impact on the company’s operations, financial position and performance.
Patents
Cell Impact could be exposed to the risk of patent infringements and plagiarism. There are no guarantees that Cell Impact will be able to protect its patents, trademarks and other intellectual property rights or that submitted applications for registration will be granted. There is a risk that new technologies and products will be developed that circumvent or replace Cell Impact’s intangible assets. Cell Impact also cannot guarantee that the company will never be considered to infringe on someone else’s intellectual property rights. Just as with disputes in general, infringement disputes may be costly and time-consuming and could therefore have a negative material impact on Cell Impact’s operations, financial position and performance.
Confidentiality and expertise
Cell Impact is dependent on confidentiality and expertise to carry out its operations. Should employees, consultants, advisors or other persons hired act in breach of confidentiality agreements regarding confidential information, or should confidential information be otherwise disclosed and exploited by competitors, it could have an adverse material effect on Cell Impact’s operations, performance and financial position.
Taxes
Cell Impact makes sales to several markets outside of Sweden. Cell Impact’s operations therefore require adequate routines regarding accounting, follow-up and payment of taxes, duties and fees. Non-compliance in these respects could have negative consequences for the company’s operations. Cell Impact’s assessment and compliance with tax laws, international tax treaties and regulations may prove to be incorrect. Through the decisions of the relevant tax authorities, Cell Impact’s previous or current tax situation may deteriorate, which may have a negative impact on the company.
Earning capacity and future capital requirements
Cell Impact has not yet reported sufficient sales revenue to make a profit and has depended on the injection of additional capital on several occasions to fund its operating activities. It cannot be said with certainty when Cell Impact will be profitable, or if Cell Impact will even be profitable. It also cannot be taken for granted that new capital can be raised as and when needed, that it can be raised on favorable terms or that the capital raised would be sufficient to fund the operations according to Cell Impact’s requirements, which could have a negative impact on the company’s development and investment opportunities.
If Cell Impact fails to raise capital when there is a need, there is a risk of a company reorganization or bankruptcy.
Credit risk
Cell Impact normally gives customers a 30 to 60-day credit period and may be negatively impacted by customers’ insolvency or bankruptcy. Cell Impact is exposed to the risk that customers may not pay for products or services ordered, or that they may pay later than expected. The risk may increase during periods of economic downturn or uncertainty. This, in turn, could have a significant negative impact on Cell Impact’s operations, performance and financial position.
Foreign exchange risk
Foreign exchange risk refers to the risk that exchange rate fluctuations could have a negative material impact on Cell Impact’s income statement, balance sheet or cash flow. Foreign exchange risk arises when flows of foreign currencies are translated into Swedish kronor. Cell Impact is exposed to foreign exchange risk as it has sales and purchases materials and services in foreign currencies. The Parent Company’s reporting currency is Swedish kronor (SEK), which means that in its interactions with international operators, the company is exposed to currency-related transaction risks, which could have a negative impact on the company’s performance and financial position.
Disputes
There is a risk that Cell Impact may become involved in a legal dispute or other legal proceeding. Such disputes may, for example, relate to alleged intellectual property infringement, the validity of certain patents or other commercial issues. Disputes and claims can be time-consuming, disrupt operations, relate to significant financial amounts or fundamentally important issues and entail significant costs, and can thus have a significant negative impact on Cell Impact’s operations, performance and financial position. The previously communicated case with the Swedish Financial Supervisory Authority is closed. The Financial Supervisory Authority acquitted Cell Impact for having failed to mention the name of a customer in an order, but it imposed a penalty fee of SEK 50,000 on the company for not having drawn up an insider list prior to the publication in question. At the time in question, the opinion of market participants was that the insider list should only be drawn up in the event of a postponed publication of insider information.
Conflict in Ukraine
The company has not been directly affected by the ongoing war in Ukraine. However, it is not unlikely that raw materials and energy prices as well as the availability of components may be affected, depending on how the conflict continues to develop.
Financial risks
The Group is exposed to various financial risks through its operations, even if they are relatively small, as turnover is limited, and the Group does not have any significant interest-bearing liabilities. The financial risks are summarized in note 5 on page 41 of the company's annual and consolidated accounts for the financial year 2022