Central Risk Areas

(ESRS 2.42 b, c)

Excess capacity in chemical divisions (Silicones, Polymers)

Scenario: There is a risk that excess capacity will emerge on the markets in the chemical divisions Silicones and Polymers.

Impact on WACKER: Price and volume pressure on our products.

Measures: We minimize this risk by adjusting our production capacity and by ensuring plant utilization through volume control and the intense cultivation of growth markets. It remains our goal to increase the share of cyclically resilient product lines in our portfolio and to rank among the global leaders in those lines.

Evaluation and risk assessment: Specific areas of our chemical business face overcapacity and weak demand, with further price pressure. For example, prices of standard silicones are very low in China and Europe, and demand is weak in certain application fields, like the textile industry. The Silicones division’s prices, however, have not fallen further to any substantial degree versus previous years, with no significant price changes currently planned for 2025. The Polymers division continues to face strong price pressure, but expects prices to have bottomed out and sees better prospects ahead. We consider the risk to be latent. Were it to materialize, its impact would be high.

Price and volume pressure on polysilicon products (Polysilicon)

Scenario: Overcapacity and very low prices for solar-grade polysilicon, narrowing of the price differential between polysilicon produced outside of China and that produced within China, growing market power of major solar-wafer manufacturers, difficult market conditions due to the paring back of programs to expand the use of photovoltaics, customs-duty risks, potential financial difficulties for solar-industry customers following a market slump.

Impact on WACKER: Volume risks arise if excessive and hurried cuts to governments’ solar-incentive programs negatively impact photovoltaic market growth. Customs duties can also dampen demand for photovoltaic products. Extreme overcapacity in China over the next few years at all stages in the solar-sector value chain, and particularly for polysilicon, could exert pressure on margins through intense price competition. All these factors could lower sales and earnings.

Measures: We counter this risk by continuously improving our cost positions and by optimizing our product and customer portfolio in line with market developments, for example by expanding our market share for semiconductor-grade polysilicon. Regions like the USA, India and Europe want to promote the establishment of new local production capacity for semiconductors and photovoltaics. This will open up new solar-sector sales volume potential for WACKER outside of China. We respond to customers’ potential liquidity problems by requiring security.

Evaluation and risk assessment: Prices of solar-grade polysilicon decreased further in the period under review. Demand for our particularly high-quality polysilicon remains high in the semiconductor industry. Customs investigations in the USA against solar imports from Malaysia, Thailand, Cambodia and Vietnam reduced demand for solar-grade polysilicon in 2024. Chinese competitors are investing heavily in new polysilicon capacity. As a result, polysilicon prices might remain under pressure again during 2025. Such a development has been factored into our planning and forecasts. We also expect that, over the coming years, the price differential between polysilicon manufactured outside of China and polysilicon manufactured within China will narrow. We believe there is a risk that this will happen more quickly than expected. This is due to the existing trade restrictions imposed by the USA. They currently allow WACKER to achieve higher prices for solar-grade polysilicon used in solar products for the US market. Signs recently emerged, however, suggesting that it might even be possible to import Chinese solar products into the US despite the import restrictions. This creates a risk that the current price advantage will be diminished. Changes in the overall statutory conditions could eliminate the price differential entirely, although we believe that this scenario is unlikely to materialize given the current geopolitical situation. All in all, we believe there is a potential risk of price and volume pressure on polysilicon; the impact would be considerable were this risk to materialize. Focusing more on our semiconductor business, however, will allow us to further minimize the risks associated with the solar business.

Decline in demand due to new technologies

Scenario: New technologies replacing previous solutions could trigger a decline in demand for our products.

Impact on WACKER: In our view, strong systemic competition is a manageable risk. In fact, we also see a contrary trend because our silicones, for example, can replace other product groups, such as PFAS (per- and polyfluorinated alkyl compounds). New applications are giving us additional opportunities, especially for sustainable products, in markets ranging from electronics and e-mobility to medicine and wound care.

Measures: We counter this risk by continuously enhancing our product range and by taking a leading role in developing new technologies. In doing so, we collaborate very closely with our customers and suppliers.

Evaluation and risk assessment: During our company’s more than 100-year history, we have often overcome the risk of markets collapsing. Rather than just reacting with product-portfolio adjustments, we actively shape tomorrow’s solutions so that we participate in nascent markets from the outset. We consider the risk to be latent. Were it to materialize, its impact would be high.

Scenario: Due to the marked fall in Siltronic AG’s share price in 2024, there is a potential impairment risk for the equity-accounted investment.

Impact on WACKER: If, alongside the market capitalization, the value in use of the equity-accounted investment in Siltronic AG falls below the carrying amount, this would result in an impairment having to be recognized, with a negative impact on WACKER’s earnings.

Measures: We are keeping a close eye on market developments and ongoing share price performance, and are assessing the impact on the company’s valuevalue.

Evaluation and risk assessment: We believe that a need for impairment could materialize in the following year. If this risk were to materialize, the potential impact on our earnings and net assets would be considerable.

(ESRS 2.42 a)

Scenario: Higher raw-material and energy prices; bottlenecks in the supply of certain raw materials; change to key relief regulations for energy-intensive industries.

Impact on WACKER: Earnings dampened by higher raw-material and energy prices. Supply bottlenecks could lead to longer customer delivery times and reduce the volumes sold.

Measures: Close cooperation between Procurement and our business divisions helps ensure that higher procurement costs are for the most part passed on to our customers, so that WACKER’s margins remain stable. For strategic raw materials and energy, we prepare regular, systematic procurement plans, which include an evaluation of the procurement risk. Wherever possible, we take appropriate countermeasures for any procurement risk classed as relevant. Such countermeasures include: long-term supply contracts; structured procurement policies for multiple suppliers under contracts of differing lengths; a wider supplier base; a higher level of safety stocks. We reduce our dependence on external suppliers by means of partial vertical integration, for example by producing our own silicon metal and vinyl acetate. As far as energy procurement is concerned, we endeavor to protect ourselves against extreme price hikes by deploying a rolling hedging strategy and utilizing all possible relief options. WACKER is making an active contribution to the efforts of the German Chemical Industry Association (VCI) to maintain special regulations for particularly energy-intensive companies, or to have these replaced by tools with an equivalent financial effect. Within this context, WACKER is advocating a Europe-wide industrial electricity price.

Evaluation and risk assessment: We consider it possible that the risk materializes; its impact would be moderate. This is because our good position for raw-material and energy procurement means we are now able to effectively manage the risks inherent in both economic upturns and downturns. If the world economy were to weaken significantly, our purchasing terms for key raw materials would allow us to adjust contractual volumes flexibly and – wherever possible – to benefit from price decreases through appropriate pricing models. Should global growth become unexpectedly strong, our volume guarantees are so extensive that we do not see any major risks to raw-material security.

As regards electricity costs, current German law partially exempts energy-intensive companies from paying various levies and surcharges. WACKER, too, benefits from these rules. We believe that the exemption rules could be restricted. This would have a major impact, as the competitive standing of individual business activities would be weakened considerably as a result. In general, energy price trends (wholesale prices, infrastructure costs and ancillary costs) will remain heavily dependent on how German and European policymakers organize the energy transition.

In particular, grid fees for electricity, natural gas and, in the future, hydrogen could continue rising – prompted firstly by the costs of grid expansion for the energy transition, secondly by further costs for eliminating grid bottlenecks and thirdly by regulatory changes.

In 2024, spot-market prices for raw materials and energy were essentially stable following a sharp rise in 2022 and a drop in 2023. However, electricity and gas prices, especially in Europe, remain significantly above their pre-2022 long-term average. The intermittent risk of gas shortages in Germany has decreased, given the high levels in the country’s gas reservoirs and the stability of supplies based on liquefied natural gas (LNG).

(ESRS 2.42 a, c)

Production, storage, filling, transport

Scenario: There are risks relating to the production, storage, filling and transport of raw materials, products and waste.

Impact on WACKER: Potential personal injury, property damage, environmental impairment, production downtimes and operational interruptions, and the obligation to pay damages.

Measures: WACKER coordinates its operational processes through its integrated management system (IMS). This system regulates workflows and responsibilities, taking into account productivity and quality as well as the environment, and health and safety. The IMS is based on statutory regulations, and on national and international standards, such as Responsible Care^® and the UN Global Compact, which go far beyond legally prescribed standards. We focus on securing the highest possible level of operational safety at our production sites by monitoring maintenance extensively and by performing regular plant inspections. We conduct thorough safety and risk analyses, from the design stage through to commissioning, to ensure the safety of our plants. We regularly hold seminars on plant and workplace safety, and protection against explosion damage. Every WACKER site has an emergency response plan in place to regulate cooperation between internal and external emergency response teams, and with the authorities. We are insured against loss events at our plants and the potential consequences of such events. Our insurance cover is in line with customary chemical-industry standards. When we work with logistics providers, we ensure that shipments of hazardous goods are always checked prior to loading. Any deficiencies are systematically recorded and tracked.

Evaluation and risk assessment: Experience has shown that risks stemming from the production, storage, filling and transport of raw materials, products and waste can never be completely ruled out. Although it is possible that such risks occur, we consider a serious loss event to be unlikely. If such an event occurred, it would have a low impact on WACKER’s earnings.

Reputation and disposal routes

Scenario: There are risks due to consequences for our reputation and the disposal routes we use, with a knock-on impact on disposal costs. These risks could be triggered by complaints lodged near our sites, or by new legislation.

Impact on WACKER: If new legal requirements or complaints from site neighbors make it necessary to change disposal routes, for example, then costs will be incurred.

Measures: At its sites, WACKER is in regular dialogue with local communities and NGOs. We are always reachable by phone or online and are available for personal talks, so that we can investigate information received from communities near our production sites. We monitor legislation continuously, taking account of new regulations in good time and aligning our processes accordingly to ensure that production and delivery are reliable and legally compliant. Our top priority here is safety – for mankind and nature, for local communities and, of course, for our employees. Steady information flows and our dialog with the public not only sensitize us to changes that might harm our reputation, but also enable us to manage our processes so that misunderstandings are avoided.

Evaluation and risk assessment: As a corporate citizen, we monitor such latent risks, focusing on safety, compliance and environmental protection. We see change as an opportunity to enhance the sustainability and efficiency of our processes so that we prevent potentially high impacts.

Storage site in Düsseldorf, Germany

Scenario: One risk relates to legal consequences and costs caused by soil contamination at a former storage site in Düsseldorf. This site was owned by one of Wacker Chemie AG’s forwarding companies, which used it for storage and transshipment.

Impact on WACKER: Wacker Chemie AG and the former freight forwarder each bear their share of the costs for groundwater treatment.

Measures: WACKER is handling the groundwater treatment systematically, in line with its sustainability commitments.

Evaluation and risk assessment: This legal risk has existed since 2003. The cost level is low. As a result, we expect the potential impact to be low despite its high probability.

Scenario: Rising life expectancy of those entitled to a pension; pay and pension adjustments; falling discount rates; significant changes in the composition of invested fund assets and in capital-market interest rates.

Impact on WACKER: A rise in pension obligations, a decline in fund assets, and a possible injection of financial resources into the pension fund or into the plan assets will affect the financial position and earnings of the Group. Further factors with a substantial impact on WACKER’s equity and earnings are the higher life expectancy of pension-fund beneficiaries, adjustments to pay and pensions, and the discount rate (used to calculate the present value of future cash flows).

Measures: The majority of WACKER’s pension guarantees are covered by the Wacker Chemie VVaG pension fund, by other pension-related funds, special-purpose assets, and by insurance plans. The investment portfolio is diversified to ensure a sufficient rate of return and to limit investment risks. The pension fund optimizes all asset items so that it attains the required return within specified risk limits. As one of the sponsoring entities, WACKER makes payments to the fund when necessary, thereby ensuring sufficient coverage for pension obligations. We adjust the calculation parameters (e.g. life expectancy) for the other defined-benefit pension commitments if need be. Since 2022, WACKER has been offering new employees in Germany a company pension in the form of direct commitments on a funded basis. These commitments are secured via a contractual trust arrangement (CTA), from which the company’s pension obligations are funded.

Evaluation and risk assessment: Employee and retiree beneficiaries of the pension fund are steadily getting older and capital-market interest rates have been very low in recent years. By adopting the above-mentioned measures to reform our company pension system, we are countering the effects of these trends on our financial position. We do not assume that special payments to the pension fund will be necessary in 2025. For the foreseeable future, however, the existing plans will continue to dominate WACKER’s company pension arrangements. In consequence, we consider it possible that more special payments to the fund will be needed in the next few years, that pension expenses and pension payments will rise further, and that higher provisions for pensions will weigh on the company’s financial position. This would probably have a medium impact on WACKER’s earnings, net assets and financial position.

Energy transition in Germany

Scenario: The transformation of Germany’s energy supply system that is necessary to achieve the CO₂-reduction targets set for 2030–2045 will likely lead to extensive and repeated legislative amendments to the regulatory framework. This will affect not only the electricity sector, the mainstay of future energy supplies, but also natural gas and the hydrogen economy. Europe’s emissions trading system (ETS) provides for a significant, regulatory increase in CO₂ prices due to growing shortages. Moreover, the permanent creation of additional reporting obligations means an ever-greater administrative burden. These regulatory measures will cause a structural rise in costs for manufacturers using fossil raw materials. As switching to non-fossil alternatives, such as biogenic raw materials or green hydrogen, also increases costs, Europe’s production costs could rise significantly overall. The absence of a comparable regulatory framework in other important economic regions (particularly in the USA and Asia) threatens production locations in Europe with global disadvantages. The European Commission plans to compensate for these disadvantages with tariff measures set out in its Carbon Border Adjustment Mechanism (CBAM). So far, the rules have only been defined for certain raw materials and are extremely complex. The Commission has announced that it will add other CO₂-intensive raw materials to this tool. It is still uncertain, though, how the competitive disadvantages mentioned will ultimately affect European production locations.

Impact on WACKER: Potential increase in energy and raw-material costs. Also a far greater administrative burden in meeting new reporting, implementation and certification obligations.

Measures: We continually monitor regulatory activity in Germany and in the EU. Whenever we anticipate changes in the current legal situation, we try to introduce our viewpoint into legislative procedures through discussions with policymakers and by participating in the work of trade associations. This primarily concerns special regulations to reduce levies and grid fees for electricity supplied to energy-intensive industries. Another relevant aspect is to regulate the effects on raw material costs by using CO₂ pricing and the Carbon Border Adjustment Mechanism (CBAM).

Evaluation and risk assessment: Legislation on energy supply and the transformation of the economy toward achieving net zero is subject to constant change. Since all political stakeholders generally support the energy transition in one form or another, we expect further significant regulatory intervention. Germany’s future government will realign the country’s regulatory framework toward climate neutrality. The scope of such a realignment remains unclear at the time of this report’s publication. We consider the risk to be latent. Were it to materialize, its impact would be high.

Potential obligation to repay energy subsidies

Scenario: Energy-intensive companies in Germany have received energy subsidies due to the high energy costs compared to prices globally. These are tied to certain conditions, some of which lie in the future. There could potentially be an obligation to repay them if these conditions are not met.

Impact on WACKER: The full or partial clawback of energy subsidies that WACKER has already received, or a refusal by the authorities to grant future subsidies, could have a substantial negative financial impact.

Measures: We have set up an internal verification and control system to ensure that the relevant requirements are met. We also keep a constant eye on regulatory developments. Whenever we anticipate changes, we try to introduce our viewpoint into relevant legislative procedures through discussions with policymakers and by participating in the work of trade associations. This applies, moreover, to regulations and decisions regarding energy subsidies for the power supply to energy-intensive industry. The relevant aspect is to regulate the impact on the viability of sites in Germany.

Evaluation and risk assessment: Legislation on energy supply and the transformation of the economy toward achieving net zero is subject to constant change. As all political stakeholders generally support job security in Germany in one form or another, we expect any decisions on the repayment of energy subsidies to be well thought-out. Germany’s future government could realign the country’s existing regulatory framework toward climate neutrality. The extent of this realignment and, as a result, also the extent to which we can make use of energy subsidies in the future, was impossible to predict at the time this report was published. We consider the risk to be low. Were it to materialize, its impact on our financial position and earnings would be high.

Polysilicon trade restrictions

Scenario: On January 10, 2025, the Chinese Ministry of Commerce announced it would conduct another expiry review on the anti-dumping and anti-subsidy tariffs on US-made solar-grade polysilicon that have been in place since 2014 and that had last been extended by five years in 2020. The Chinese government imposed these tariffs in response to the anti-dumping and anti-subsidy tariffs that the USA had imposed on Chinese-made photovoltaic cells and modules in 2012 and 2013. In the years that followed, the US imposed further tariffs on solar modules and cells produced worldwide, including in China (Section 201 safeguard actions). In 2018, the USA imposed Section 301 tariffs of between 7.5 percent and 25 percent on almost all imports from China. With effect from January 1, 2025, the US government increased the Section 301 tariffs for selected products to 50 percent, e.g. for Chinese polysilicon, and to 100 percent for electric cars from China. In 2023, the US administration had already imposed export restrictions on China for semiconductor materials and production technologies used to manufacture advanced chips. The US tariffs on Chinese cells and modules, as well as the import restrictions to combat forced labor that the USA introduced in mid-2021, have resulted in substantial wafer, cell and module capacities being created outside of China in recent years, particularly in Southeast Asia, India and South Korea. The latter move resulted in differentiated prices for solar-grade polysilicon from the middle of 2022 onward, meaning that higher prices can be achieved for polysilicon produced outside of China, which is used, in particular, for products from Southeast Asia. The investigations launched by the US authorities in April 2024 on anti-dumping and countervailing duties (ADD and CVD, respectively) imposed on photovoltaic products from manufacturers in Southeast Asia triggered uncertainty on the market, with a negative impact on polysilicon sales volumes in this region. We expect the market to stabilize again, and the supply chains for solar-grade polysilicon to be restructured, once a final decision is made in April 2025. Further uncertainty associated with these investigations nevertheless pose a risk to volumes and selling prices. Our business with polysilicon for semiconductor applications is not affected directly by this case. In general, trade restrictions like these could affect not just polysilicon, but products in all business divisions in the future. Further export restrictions are expected in 2025 as a result of the change in US administration. The fact that decisions are often made at short notice is making the situation increasingly difficult to predict.

Impact on WACKER: Due to China’s high tariffs on US-produced solar-grade polysilicon, Chinese solar-industry customers are not buying any such product from WACKER’s Charleston site for their production plants in China. The USA’s anti-dumping and countervailing duties, as well as its restrictions on exports to China’s semiconductor sector, could possibly have an unfavorable impact on our earnings, net assets and financial position and a negative impact on volumes and long-term customer relations.

Measures: It is difficult to assess the odds of an amicable settlement in this trade dispute. In the meantime, however, most of the major wafer producers outside of China have qualified the semiconductor-grade silicon from our Charleston site. As a result, we have achieved a substantial increase in the proportion of our sales volume accounted for by semiconductor-grade polysilicon. What is more, new opportunities to sell solar-grade polysilicon in countries other than China are constantly emerging. This trend is being strengthened by programs incentivizing the expansion of local photovoltaic value chains in the USA, Europe, India and Southeast Asia, as well as by the greater importance attached to compliance with environmental, social and governance standards when it comes to procurement decisions. We are monitoring measures like these not just for polysilicon, but for the markets relevant to all of our business divisions.

Evaluation and risk assessment: Demand for solar-grade polysilicon outside of China is constantly increasing. On top of that, many countries and regions are promoting the development of their own photovoltaic value chains in order to increase their independence and resilience. Environmental, social and governance standards are playing an ever-increasing role in procurement decisions. We can therefore assume that the coming years will see an increase in new solar-wafer capacity, outside of China, too. We will be able to meet this capacity at higher prices, thanks to our US and German-produced polysilicon, as well. This opens up additional opportunities for WACKER to increase its sales volumes. Given our broad customer and product portfolio, we also do not currently expect the USA’s export restrictions on semiconductor products to have any notable effects on our business in semiconductor-grade polysilicon. We consider the probability of such events to be latent, as market uncertainty is on the rise amid ongoing trade policy disputes and geopolitical tension. Our polysilicon business could be hit by the consequences of these developments. Were these risks to materialize, they could have a major impact on our earnings trend.

New regulations for production processes, products and their applications

Scenario: New legal provisions in the production and use of chemical substances or groups of substances mean greater restrictions or even bans. New regulations or the elimination of specific materials in the supply chain make it necessary to modify our production processes or reformulate our products. They also impose more extensive information requirements on us and, in some cases, on our customers as well. Additional legal provisions in individual countries mean more effort for the necessary registrations internationally.

Impact on WACKER: Additional investments in production facilities, conversion costs, revenue losses in individual or entire application fields, plus extra costs for the required audits and registrations.

Measures: WACKER continually monitors the regulatory environment surrounding its products and production processes so that it can react promptly to impending changes. This also includes any potential relocation of production. We are continuously optimizing our production processes and regularly review our product portfolio. Any other necessary measures will be aligned with the changed regulatory environment in each specific situation.

Evaluation and risk assessment: It is very likely that new legal regulations will make it necessary to modify our product portfolio or production processes. New provisions might require additional investments in our production facilities or modifications to our product portfolio. Should such changes occur, their impact would be low.

Scenario: Cyber attacks, system errors and unauthorized access to our IT systems and our production plants and networks, resulting in a threat to data confidentiality, integrity or security.

Impact on WACKER: Negative impact on the company’s earnings, net assets and financial position, on production processes and on workflows, on its reputation, plus loss of know-how.

Measures: WACKER constantly monitors the information technology it uses and also invests in protecting its IT systems and applications, thereby safeguarding the functionality and stability of its computer-based business processes. Our IT-security and risk-management specialists are responsible for handling hazards in a cost-efficient way. They achieve this through the operation and continuous improvement of our Information Security Management System (ISMS) in line with the ISO 27001 standard. It is also reviewed externally at regular intervals (e.g. in the course of a TISAX Label Assessment). Reliable backup and recovery processes are an essential element in safeguarding the availability of our systems. For emergencies, we have set up processes and procedures in the shape of regularly tested emergency plans (IT service continuity management). We minimize project-related IT risks by applying uniform project/quality management methods. These ensure that project outcomes and possible changes to IT services are integrated into our system landscape in a controlled manner and in accordance with defined processes.

We log any operations-related risks that arise during the IT risk management process, which is based on international standards. We evaluate them and take appropriate technical and organizational countermeasures. The Executive Board is briefed by the Chief Information Security Officer (CISO) on the current cyber-risk status and ongoing IT and information security projects at least once a quarter. Our Cyber Defense Center (CDC) continually monitors the security of our IT landscape and our applications. If the CDC identifies any vulnerabilities, it has them rectified in a timely manner. Our authorization systems, which are regularly updated to meet new requirements and technologies, are based on the need-to-know and least-privilege principles. We protect our IT systems against attacks by means of various state-of-the-art IT security systems, which are continuously adapted and expanded in response to emerging threats. We have set up an international security team that takes organizational and technical measures to counter risks to the confidentiality, integrity and availability of information and systems. We increase employee awareness through events and training on information security and with a campaign involving continuous anti-phishing tests. In the year under review, we organized a month of diverse communication measures in October to sensitize employees groupwide to the topic of cyber security. In addition, we regularly conduct comprehensive penetration tests, audits and assessments at our sites in Germany and elsewhere. We continually observe and evaluate the techniques of potential attackers and, where necessary, realign our defense strategies accordingly. In addition, we constantly exchange information with other companies and interest groups on the subjects of cyber and data security.

Evaluation and risk assessment: A long-term failure of IT systems or a major loss of data could considerably impair WACKER’s operations. As in previous years, 2024 saw a large number of attempted attacks on our IT systems and infrastructure. It cannot be ruled out that such attacks could succeed in certain cases despite the precautions we have taken. We thus consider the probability of such events to be latent. If, as a result of such an event, any of our IT systems faced downtime and service disruptions which affected a significant number of users or which lasted for a substantial period, the impact could be high.

Scenario: Demographic change; employee health and resilience, especially with longer working lives; lack of highly qualified or managerial employees; problems in filling executive positions; attractiveness of the chemical industry to employees, particularly for the younger generation.

Impact on WACKER: The lack of technical and managerial employees could dampen our continued growth and lead to the loss of our technological edge.

Measures: We clarify risk sources early on and limit HR risks through our personnel policies. In particular, we have a talent management process in place, which we use to draw up development plans for our employees. In addition, we offer a wide variety of training programs, attractive social benefits and performance-oriented compensation. We also offer our employees in Germany a wide range of working-time models and arrangements to better balance career demands with the different phases of their lives.

We set up several occupational health programs to maintain and promote our employees’ health. As a pioneer, WACKER offers apprentices in their second year an extensive nine-month health program called BETSI, so that they stay fit during their apprenticeships. Further initiatives inform and encourage employees to lead a healthy lifestyle. For example, we have a one-week health program, where participants are given leave, or we cover the cost of company runs at our locations.

WACKER has established a detailed, groupwide succession planning process for all key positions in the company, including all positions held by senior executives (OFKs). Our succession strategy distinguishes between short-term succession needs (up to two years) and medium-term needs (two to four years). In addition, WACKER has appointed deputies for senior executives in the event of a lengthy absence or illness.

By operating a global employer branding campaign and providing details of training courses and entry-level opportunities, we also target younger generations, who we approach via social media channels, for example. Our diversity goals focus on welcoming people in all their diversity to our global team. With our activities for German Diversity Day in May and Global Diversity Awareness Month in October, we underscored diversity’s importance at WACKER, both groupwide and externally on social media.

Expansion at our hub in Plzeň (Czech Republic), for example, is allowing us to tap into other pools of skilled employees.

Evaluation and risk assessment: Demographic change will increase the risk of not being able to find sufficiently qualified personnel for technical and managerial positions in the medium to long term. Risks to our personnel needs could be high in the short term. Should these risks materialize, the impact on Group earnings would be low. We will continue to face these latent risks in the long term, and they would have a major impact were they to materialize.

Scenario: Pandemics and natural disasters; war or civil war; terrorist threats and attacks, and thus unsafe locations; the unforeseeable impact of political developments.

Impact on WACKER: Impairment of our company’s capacity to act; supply bottlenecks; production outages; supply-chain disruptions; loss of trade receivables; impact on sales and earnings.

Measures: Our management entities and our sites have prepared and communicated plans and measures to minimize the effects of a pandemic on the health of our employees and on our business processes. Our pandemic-preparedness plan ensures a uniform, coordinated approach. The financial impact of damage to our production plants due to natural disasters is partly covered by insurance. As WACKER has production sites on various continents, it can always ensure a certain degree of manufacturing and delivery capability even if individual plants fail. In addition, we are closely monitoring the current political crisis in South Korea through our local team of experts and will initiate further measures if necessary.

Evaluation and risk assessment: Risks from pandemics, natural disasters, acts of war or civil war can never be ruled out entirely. The coronavirus pandemic and the wars in Ukraine and the Middle East are clear evidence of this. Should such latent scenarios materialize, their impact could be high.

Scenario: Acute physical climate risks due to hazards, in particular extreme weather-related events, including gale-force winds, floods, fires and heat waves. Chronic physical risks resulting from longer-term changes in the climate, such as temperature changes, shifts in precipitation patterns and wind conditions, rising sea levels and water scarcity.

Impact on WACKER: Physical climate risks could result in personal injury, property damage and environmental impairment; in dampened sales and earnings; in production downtimes, supply bottlenecks, supply-chain disruptions and obligations to pay damages; and in operational interruptions.

Measures: As for physical risks, the financial impact of damage to our production plants due to natural disasters is partly covered by insurance. As WACKER has production sites on various continents, our manufacturing and delivery capability is ensured even if individual plants fail. We deal with supply bottlenecks and supply-chain disruptions by covering our needs in a structured way through multiple suppliers. We regularly conduct risk analyses for our sites, taking into account both acute and chronic climate changes. We also consider climate-change risks when assessing our investments.

Evaluation and risk assessment: Physical risks from climate change cannot be ruled out. Our choice of sites and our regular risk analyses and precautionary measures partially protect us against the effects of acute and chronic events. For this reason, we currently consider the risk to be latent. Should a catastrophic climate scenario occur, it could have a high impact on the Group’s earnings.