Central Risk Areas

Defining the probability and impact of risk occurrence

In the risk management report, we distinguish between latent risks – i.e. risks with a very low probability of occurrence (less than 10 percent) or an impact time outside of the next twelve months – and acute risks that we classify as unlikely, possible or likely. Acute risks involve cases that are considered to have a probability of greater than/equal to 10 percent or that have been specifically identified. To decide which special risks, in this sense, must be taken into account, we look closely at the individual cases.

Acute risks that could individually or cumulatively jeopardize the company’s continued existence are to be reported immediately to the Executive Board of Wacker Chemie AG. Relevant, individual risks in this respect could lead to a one-off loss in earnings of at least €5 million or to a total loss in earnings (before taxes) of at least €10 million over four years.

By adopting these thresholds, we acknowledge that several small-scale risks could also accumulate into a risk that jeopardizes the company’s continued existence. It is irrelevant for a corporate unit’s risk-reporting obligations whether the risk source is sales or cost related.

Corporate Controlling collates all the risks and notifies the Executive Board about acute risks in a report that lists each risk with an impact of €5 million or more. The report is supplemented every December by an overview of all latent risks.

We have defined categories to describe the probability of identified risks occurring. The categories provide a framework for understanding our assessment of individual areas of risk. In percentage terms, our categories define the range of probability as follows:

• Latent: under 10 percent

• Unlikely: 10 to 24 percent

• Possible: 25 to 75 percent

• Likely: over 75 percent

We also use categories to describe how the occurrence of the risks listed might affect the Group’s earnings, net assets or financial position. We assess the possible effect on earnings using the net method, i.e. after taking appropriate countermeasures, such as hedging, or including provisions that have already been set up. The categories used, which are set out below, define the ranges:

• Low: up to €25 million

• Medium: over €25 million up to €100 million

• High: over €100 million

The table below shows our estimation of the probability of risks and of how the occurrence of those risks might affect the Group’s earnings, net assets or financial position. The statements refer to the forecast period, i.e. 2026. The risks listed in the table affect all business divisions. If risks only affect individual segments, the relevant business divisions are shown in the risk category. In the reporting period, we have included new risks that were not categorized in the previous year. Risks that were only assessed and measured for the previous year are no longer assigned to the central risk areas in the reporting year, as they neither meet the criteria for acute risks nor can they be assessed as “high” latent risks (impact of over €100 million).

Overall economic risks

Scenario: Economic slowdown.

Impact on WACKER: Production-capacity utilization drops, specific manufacturing costs rise, and the Group’s sales and earnings decline.

Measures: We counter this risk by continuously observing economic trends in our key sales markets. If we detect economic weakness, we take early precautions to flexibly realign production capacities, resources and inventories with customer demand. In such a case, we concentrate capacity utilization on production locations with the best cost position, for example.

Evaluation and risk assessment: There is a risk that, in terms of personnel, certain business activities within the company cannot be adapted to instances of underutilization fast enough. We rate this risk as being likely with a low impact if it were to materialize. High inflation rates worldwide, high interest rates, high energy prices in Europe and consumers’ ongoing reluctance to spend have been a considerable drag on the economy since 2022. We have already included these possibilities in our planning. We believe there is a latent risk that the global economy will slow further in 2026. Were this risk to materialize, it would have a major impact on WACKER’s earnings.

Sales-market risks

(ESRS 2.42 b, c)

Excess capacity in chemical divisions (Silicones, Polymers)

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

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: Our chemical business faces further overcapacity and weak demand, with further price pressure in some cases. 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 2026. The Polymers division is still facing considerable price pressure. We consider the risk to be latent. Were it to materialize, its impact would be high.

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.

Accounting risks

Value of property, plant, and equipment and of intangible assets

Scenario: Market and business prospects change; capacities are permanently underutilized; structural changes with decommissioning of production plants.

Impact on WACKER: In light of the current challenging economic situation, there is a risk of valuation adjustments having to be recognized for the production plants and goodwill of SICO Performance Material (Shandong) Co., Ltd., China. In addition to such adjustments having to be recognized, disposal losses may arise upon sale or decommissioning and lead to earnings being impacted for the Group.

Measures: We keep a close eye on business and market trends as well as other events likely to impact the recoverability of the assets concerned, and we carry out impairment tests if required.

Evaluation and risk assessment: We believe the occurrence of valuation adjustments to be unlikely. If this risk were to materialize, we would rate the potential impact on our earnings and net assets as medium.

Stake in Siltronic AG

Scenario: In the case of the equity-accounted stake in Siltronic AG, valuation adjustments, as well as reversals of impairment losses in subsequent periods, may arise if the enterprise value changes as a result of altered market and business prospects and/or share-price fluctuations.

Impact on WACKER: Valuation adjustments may cause earnings to be impacted for the Group; reversals of impairment losses, in contrast, may cause earnings to improve. A valuation adjustment would be necessary if the value in use determined as part of a valuation decreases. A reversal of an impairment loss, in contrast, would be necessary if the share price exceeds the carrying amount on the closing date or if the value in use increases.

Measures: We keep a close eye on Siltronic AG’s business and market trends as well as changes in its share price, and carry out impairment tests as needed.

Evaluation and risk assessment: We believe the occurrence of a valuation adjustment to be unlikely. If this risk were to materialize, the potential impact on our earnings and net assets would be high.

Procurement-market risks

(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 has for years been advocating a Europe-wide industrial electricity price. In 2025, the German government announced its intention to introduce an industrial electricity price to Germany in 2026.

Evaluation and risk assessment: We consider the occurrence of the risk to be possible; its impact would be low. 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. Moreover, the prices of the raw materials relevant to WACKER fell year over year. 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. Any restriction on the exemption rules could reduce the competitiveness of specific business activities. 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 2025, spot market prices for raw materials and energy remained largely stable. However, electricity and gas prices, especially in Europe, remain significantly above their pre-2022 long-term average.

Production and environmental risks

(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: Personal injury; property damage and environmental impairment; production downtimes and operational interruptions; and the obligation to pay damages.

Measures: WACKER coordinates its 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. From 1948 until 1974, this site was owned by one of Wacker Chemie AG 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.

Pensions

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. The capital-market interest rates were very low until 2021; interest rates have since risen considerably. We consider the current interest rate environment to be stable. By adopting the above-mentioned measures to reform our company pension system, we have also countered the negative impact on our financial position. We do not assume that special payments to the pension fund will be necessary in 2026. For the foreseeable future, however, the existing plans will continue to dominate WACKER’s company pension arrangements. In consequence, we currently consider the likelihood that more special payments to the fund will be needed in the next few years to be slight; as are the likelihoods that pension expenses and pension payments will continue to rise 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.

Regulatory risks

Energy transition in Germany

Scenario: Achieving the CO₂-reduction targets set for 2030 – 2045 will likely lead to extensive and repeated legislative amendments to the regulatory framework as part of the transformation of Germany’s energy supply system (energy transition). 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. We consider the risk to be latent. Were it to materialize, its impact would be high.

US import duties

Scenario: In January 2025, the US government published its “America First Trade Policy,” which envisages a national realignment of tariff policy and a review of trade relations in order to manage trade deficits and investment flows in favor of the USA.

Over the course of the year, the US government supplemented existing standard tariffs with blanket country-specific ones. These additional tariffs were imposed on almost all countries before being temporarily suspended and repeatedly adjusted. In addition, sanctions-policy tariffs and product-specific duties (relevant to, e.g., aluminum in products) were introduced unilaterally. At the same time, the US government established an exemption list by tariff category. Many of WACKER’s major import categories were initially exempted; in some cases, these exemptions were removed over the course of the year. Further developments are difficult to predict.

Impact on WACKER: In addition to the direct effects in the form of higher tariff costs, WACKER is exposed to indirect risks from a possible fragmentation of the global economy as a result of the USA’s tariff policy. Risks and costs are primarily the result of declining demand in end markets and of the impact on supply chains, with an indirect effect on WACKER too. But these risks and costs are also the result of copycat effects (e.g. additional tariffs imposed by Mexico on Asia) or more complex import processes (e.g. additional tariffs on the amount of aluminum contained in a product, etc.). In view of the dynamic nature of the present situation, together with ongoing negotiations and changes, the consequences are difficult to assess overall.

Measures: We have included pass-through clauses for tariff costs in our customer contracts and are monitoring developments so that we can react promptly to changes and optimize supply chains where necessary.

Evaluation and risk assessment: If additional tariff costs were to materialize, we would pass these on to our customers wherever possible. We consider the risk to be possible. We would assess the direct impact as “medium” if this risk were to materialize. Additional tariffs could have an indirect impact on WACKER’s business if our customers were to be subject to additional tariffs and their ordering behavior changed as a result. The indirect impact could be high if this risk were to occur.

Polysilicon trade restrictions

Scenario: As a result of the international trade conflicts that have been ongoing for years, polysilicon and its derivatives are subject to various tariff regulations which are currently affecting the movement of goods between different regions of the world, such as the USA, China, India and Southeast Asia. Causes of further uncertainty currently include an investigation initiated by the US Department of Commerce on July 1, 2025, under Section 232 of the Trade Expansion Act, to assess the impact of imports of polysilicon and its downstream products on US national security and, if necessary, to protect US industry from a loss of know-how and a drop in prices due to overcapacity. The future price trend for WACKER’s solar-grade polysilicon may depend to a large extent on the outcome of these proceedings and on the degree to which market access is regulated. Depending on the outcome of these Section 232 proceedings, the price of solar-grade polysilicon could decline, which would make it difficult or impossible for WACKER to sell at prices that cover the costs.

Impact on WACKER: A possible tightening of US anti-dumping and countervailing duties, as well as other globally relevant import and export restrictions in the semiconductor sector, not to mention an unfavorable outcome of the Section 232 proceedings on WACKER, could have an unfavorable impact on the Group’s net assets, financial position and earnings and could negatively impact volumes and long-term customer relationships.

Measures: The further development of global trade conflicts and the outcome of the Section 232 proceedings are hard to predict. We have now significantly increased the amount of semiconductor-grade polysilicon that accounts for our total volumes and we see potential for further growth here. In addition, the interest in regionally diversifying supply chains in many countries means that new sales opportunities are possible for solar-grade polysilicon, too. This trend is being strengthened, for example, 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.

Evaluation and risk assessment: We consider the probability of such events occurring to be possible, as market uncertainty is on the rise amid ongoing trade-policy disputes and geopolitical tension. Our polysilicon business could be hit hard by the consequences of these developments.

IT risks

Scenario: Cyberattacks, 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 campaign month in October to sensitize employees groupwide to the topic of cybersecurity. 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, 2025 saw a large number of attempted attacks on our IT systems and infrastructure. Despite our precautionary measures, we cannot rule out the possibility that attacks like these could be successful in isolated cases. 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.

Personnel-related risks

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.

WACKER has established a detailed, groupwide succession planning process for all key positions in the company, including all positions held by senior executives (OFKs). 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.

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 long term. We consider this risk to be latent with a high impact if it were to occur. At present, we have not identified any acute HR risk due to the ongoing PACE restructuring program.

External risks

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. WACKER is also developing a preparedness plan to be ready for potential armed conflicts. 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.

Evaluation and risk assessment: Risks from pandemics, natural disasters and 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.

Physical climate risks

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.