The Budimex Group, in the course of its activities, is exposed to various types of financial risk: currency risk, interest rate risk, price risk, credit risk and liquidity risk.
The counterparty credit risk is an inherent business risk. Despite the introduction of restrictive debt control procedures in the Group, there is still a risk related to the insolvency of investors. Delays in the timely settlement of receivables may negatively affect the Group’s financial results, which will require write-downs on receivables and financing the operations with external debt.
The information concerning the Budimex Group’s objectives and methods of financial risk management are included in the consolidated financial statements for the year ended 31 December 2020 (Note 3).
Execution of construction contracts takes place under specific technical and economic conditions, which influences the level of the margin obtained. The Companies of the Budimex Group, which provide construction services, monitor technical, organisational, legal, and financial risks related to the planning and current course of works in individual contracts. Despite the control mechanisms introduced and the protection of general risks (credit, currency and civil liability risks), it is possible for the occurrence of the factors that cause the execution of a contract with a margin lower than originally planned, among which are:
- general economic uncertainty caused by the current COVID-19 pandemic,
- increase in prices of construction materials, petroleum materials and energy,
- increase in service prices and limited availability or bankruptcy of subcontractors,
- increase in employment costs and limited availability of skilled workers,
- delays in timely performance of or insufficient quality of the subcontractors' works,
- delays in obtaining appropriate administrative decisions,
- change in the scope of work or technologies agreed in the contracts,
- adverse weather or ground conditions.