Risk factors

Rugvista Group is exposed to a number of risks related to its business and related to the implementation of its strategy. The risk factors that are currently considered most significant for Rugvista Group are described below, without ranking. The significance of the risk factors has been assessed based on the likelihood of their occurrence and the expected extent of their negative impact.

Macroeconomic and geopolitical risks

Demand for the products offered by the company depends on a number of factors that are affected by the macroeconomic climate and consumers' disposable income and purchasing power, such as market interest rates, unemployment or risk of unemployment, tax levels, employment rates, and other macroeconomic factors. Rugs, as infrequently purchased goods, are an example of products that consumers may choose to forgo in a recession that leads to actual or feared deterioration in consumers' disposable income and purchasing power. A recession or general decline in economic activity in one or more of Rugvista's markets could therefore have a significant negative impact on demand for the products offered by Rugvista and on the ability to maintain profitable pricing.

The global economy is also negatively affected by tariffs and other trade-restrictive measures introduced by the US, EU, and China. The company has no material exposure to the US market and is therefore not directly affected by trade conflicts or increased tariffs related to the US. A large part of the rugs in Rugvista's product range originate from countries with increased geopolitical risk, such as Turkey and Afghanistan. This means that Rugvista Group is subject to risks related to geopolitical uncertainty in the Middle East. The group has no direct exposure in Israel or Gaza, but events may have an indirect impact through consumer confidence, inflation, GDP growth, etc. Unrest in the Red Sea has had some impact on our supply chain for products from India through longer delivery times and higher freight costs. The impact on Rugvista's results has been and is expected to continue to be marginal, but management is following developments.

Uncertainty related to geopolitical risk can, for example, involve risks related to Rugvista Group's access to rugs if the supply from the wholesalers from which the company buys rugs were to decrease or cease, if the factories where Rugvista Group's rugs are manufactured were to be affected by production disruptions, or if trade sanctions against any jurisdiction were to be introduced. A negative geopolitical development could therefore have a significant negative impact on Rugvista Group's business and operating result. The uncertainty in the macroeconomic outlook has in recent years resulted in lower consumer confidence and thus reduced consumption. Depending on how long the uncertainty in the international economy continues and how it develops, it may lead to further deterioration in household purchasing power and thus have a negative impact on Rugvista Group's business and operating result. Macroeconomic outlooks with potentially more protectionist states, high inflation, and interest rate hikes can also lead to higher raw material and product prices.

Risks related to brand and reputation as well as competition

The company's reputation and brand are crucial for the company's ability to attract new and retain existing customers, employees, and partners. Customer satisfaction is therefore the company's top priority, and something that the company measures and follows continuously. Treatment and customer service are crucial for maintaining the company's reputation. Negative customer reviews that are spread to existing and potential customers could cause significant damage to the company's reputation, demand for the company's rugs, and ultimately its market position and competitiveness. Rugvista Group's competitors consist mainly of traditional retailers, multi-channel home furnishings retailers, online-based rug retailers, and online-based department stores. Important competitive factors when it comes to online rug sales include, among other things, price and quality of the product, the ability to attract prevailing customer and market preferences with design and material choices, delivery and payment terms (including conditions for customer returns), and user-friendliness on websites. Companies that currently focus, to a greater or lesser extent, on other types of products, services, customer segments, or geographic markets, or traditional physical carpet retailers, may increase or start online sales of rugs to Rugvista Group's target groups. In addition, wholesalers, through which Rugvista Group buys rugs, may themselves start selling rugs directly to end customers. There is therefore a risk that Rugvista Group will encounter new competitors who, for example, may have greater financial resources and be able to take advantage of economies of scale to a greater extent than the company. There is therefore a risk that such companies will be able to meet customer preferences to a greater extent than the company. Increased competition may lead to Rugvista Group losing market shares, resulting in lower net sales, higher costs, and lower margins. To meet increased competition, Rugvista Group may, for example, be forced to lower product prices and/or increase investments in marketing, which risks leading to lower margins and/or increased costs for the company.

Risks related to sustainability and the environment

Risks related to sustainability continue to grow in importance as regulations are tightened and reporting requirements increase. The risks include, among other things, resource scarcity, climate change, and biodiversity. Environmentally related risks affect most traditional risks, such as macroeconomic risks, and can contribute to, among other things, a decrease in consumers' real purchasing power and be cost-driving in Rugvista's value chain.

Rugvista Group strives to have a leading role in sustainability, and Rugvista Group's opportunities to conduct long-term profitable business are highly dependent on managing the sustainability-related risks to which the company is exposed through its business. For a detailed description of risks related to sustainability factors such as human rights, working conditions, environment, bribery, and corruption, see the risk section in the sustainability report.

Risks related to suppliers and collaborative partners

Rugvista Group is dependent on purchases from wholesalers within the EU (mainly for traditional rugs) or suppliers primarily in India and Turkey for the manufacture and delivery of rugs. Rugvista Group is therefore subject to risks associated with, among other things, changes in production prices, increased transportation costs, and inadequate production/delivery capacity and production quality.

The company also collaborates with payment service providers, staffing companies, transportation and logistics companies for the transportation of products to and from customers, and other external parties within the framework of its business. The company is dependent on external parties fulfilling their contractual obligations regarding quality and delivery time and meeting Rugvista's guidelines and other industry standards regarding the environment, working environment, anti-corruption, human rights, and business ethics. There is a risk that such parties may be affected by financial difficulties, fail to deliver on time or in accordance with the cost structure or quality they have undertaken, or fail to meet applicable guidelines and industry standards. Suppliers' ability to fulfill their obligations may also be affected by external circumstances such as natural disasters and epidemics. For risks related to suppliers and partners, see also the risk section in the sustainability report.

Risks related to the company's office and logistics center

Rugvista Group has an office and logistics center in Malmö that warehouses and handles the company's rugs. Rugvista Group's business is dependent on efficient handling of purchased products, packaging, outgoing freight and invoice handling, control and handling of returns, and high functionality in the company's ERP system. Events such as sabotage, fire, and natural disasters could cause damage to this center and the products in Rugvista Group's inventory. Even if such damage were covered by insurance, extensive damage to the company's premises, plant assets, and inventory would risk entailing a replacement time for the machines or products in question and could therefore potentially mean that the company fails to fulfill its obligations to its customers on time and ultimately does not have sufficient products for the company's range against customers.

IT and cybersecurity

Rugvista Group's sales are online-based and take place almost exclusively through Rugvista Group's webshops. Rugvista Group's ability to continue its operations and maintain and increase its customer base and sales volumes to a large extent depends on the company's technology platform being continuously developed, functioning well and having good availability. There is a risk that the company's technology platform and IT systems may prove to be under-dimensioned or malfunction, especially if the traffic on the company's websites would increase faster than the company anticipated. Rugvista Group is primarily dependent on high availability of systems that make the webstores continuously available to potential customers. Rugvista Group is thus subject to risks related to interruptions and disruptions in its technical infrastructure, which can be caused by computer viruses, power outages, sabotage and human or technical errors. IT attacks, errors and damage to IT systems, operational disruptions and incorrect or inadequate delivery of IT services from IT suppliers can lead to extensive interruptions or disruptions to the company's webstores and other IT systems, which in turn can negatively impact Rugvista Group's operations, profitability and financial position. Cybersecurity risks within Rugvista Group's operations arise primarily in relation to important and sensitive information that the company possesses, such as product information, customer registers, data used to generate demand forecasts, marketing and customer engagement, and data used to understand how Rugvista Group's customers use the company's webstores and to analyze customer behavior.

Financial risks

The following financial risks have been identified and are described further in note 15 in the financial reporting:

• Liquidity and financing risks
• Currency risks
• Risk of impairment of goodwill
• Interest rate risks