Risks related to the Company’s business and the industry in which it operates

Price risk and liquidity risk

The price risk stems from the fact that car leasing and rental companies are exposed to potential losses from car sales operations when the sale price is lower than the residual value. Any change in prices in the used car market may therefore negatively impact the revenues that the Company is able to derive from the sales of used cars.

The liquidity risk is associated with the Company’s holding of non-current assets. The Company takes the risk of the residual value of the vehicles which it operates under the operating lease and short-term rental (rent-a-car) service and which it sells at the end of the operating lease, i.e. usually after 24-48 months of use, within short-term rental activities. The Company carries out these sales operations systematically for a significant proportion of the car fleet in its portfolio, thus generating profit or loss from such activities. The proceeds from the sale of a used car, as well as the risk that the sale price of a used car will be lower than its book value at the end of the operating lease or its service life in the case of short-term rentals, are mainly determined by external factors.

Credit risk

The credit risk is the risk that the Company’s debtors will not be able to comply with their obligations on maturity due to the deterioration of their financial situation. The Company manages this risk mainly by diversifying its business lines, customers, degree of exposure in a certain industry or a certain geographical area. In addition, financial flows and statements of receipts and payments for each partner are monitored and controlled at all times, while maintaining a real connection with them.

Cash-flow risk

The Company requires a significant amount of cash to service its debt and to make planned capital expenditures, and its ability to generate cash or refinance its debt depends on many factors beyond its control. The Company borrows considerable amounts on an annual basis, in accordance with the development of its operations, through finance leases, bank loans and short-term credit facilities to finance its purchases of new cars. In order to manage risks, the Company has implemented a prudent financial management aiming at having significant cash reserves, which will ensure sufficient working capital even where receipts are delayed or reduced over a long period of time.

The Company is exposed to interest rate fluctuation risks

Most of the Company’s financing contracts provide for a variable interest rate, dependent on EURIBOR or ROBOR. Therefore, the Company is exposed to the risk that these interest rates will increase during financing contracts, which could result in the payment of higher interest and could have a material adverse effect on the Company’s business, financial standing and results of its operations.

Exceptional risk

The COVID19 pandemic and the war in Ukraine are two disruptive factors that have (re)shaped the local and international economic environment, but which few have seen as becoming part of the current reality. Investors are encouraged to take into account that such events can have an adverse impact on the Company’s business.

Regarding the COVID19 pandemic, movement restrictions were completely lifted in 2022, but the risk of new outbreaks is still present. For preventive purposes, Autonom maintained the minimum requirements to prevent the spread of respiratory infections according to the legal recommendations in force.

The rapid adaptation to the new reality, which contributed to diminishing the negative effect of the pandemic and the war on Autonom’s business, has already prepared the management for an adequate response in such situations.

The Company’s business may be impacted by a negative evolution of economic circumstances

The dynamics of the Company’s business and profitability are sensitive to the general conditions of the economic environment in Romania and a slowdown or recession of the local economy would reflect negatively on the vast majority of operational parameters.

Risks of non-compliance with legislation:

We make sure that we are up to date with the applicable employee health and safety legislation, environmental legislation, personnel legislation, financial legislation, agency operation legislation, and that we appropriately control risks across all our operations. We have quality management, occupational health and safety management and environmental management standards (ISO 9001, ISO 14001 and ISO 45001) in place. We have established strict rules for compliance with all relevant internal and external regulations and we constantly strive to minimize the risk of non-compliance. We are aware of these risks, but we manage them by keeping ourselves informed at all times on the applicable legal requirements, by monitoring the strict compliance with various operational aspects of our business and by providing our employees with intensive training and evaluating them on a regular basis.

Risks related to decrease in tourism and disruptions in the operation of air transport industry

Part of the Group’s business, more specifically the short-term car rental service, is seasonal and may be impacted by the evolution of tourism in Romania and by the restrictions on travels from other countries to Romania. In event of an extended state of emergency or general restrictions on air traffic from or in Romania, the rent-a-car business line may be adversely impacted. In order to manage this risk, the management constantly monitors the work of agencies across the country, particularly those located in airports, to control the operating costs related to their operations.

The Company may not be able to sell its used cars at the intended prices, which could result in losses

The Company assumes the risk of the residual value of the vehicles it operates as part of the operating lease and short-term rental (rent-a-car) service and that it sells at the end of the operating lease.

The Company’s business is dependent on the activity of motor vehicle manufacturers and distributors

The Company purchases motor vehicles from more than 50 vehicle manufacturers and distributors, being dependent on the supply of popular vehicle models, high-end products, in sufficient numbers to maintain operations and to purchase them based on attractive terms. There can be no assurance that the Company will be able to maintain a long-term relation with these manufacturers and distributors in order to provide certainty regarding the Company’s future vehicle purchases, and the Company may have difficulty replacing these manufacturers and distributors with other suppliers to deliver the motor vehicles needed for the Company’s business under the same favorable terms.

The global shortage of semiconductors and chips could lead to delays in vehicle deliveries by manufacturers or distributors

The COVID-19 pandemic has created a global shortage that is expected to continue in the semiconductor and chip industry, and therefore along the automotive manufacturing and distribution chain. The Company’s manufacturers and distributors may experience significant delays in the delivery of the motor vehicles ordered by the Company. Therefore, the Company may be faced with a lower capacity to renew its fleet as per the time limits set out in the contracts with its partners and at a level matching the evolution of demand. Any limitation in the Company’s ability to renew its fleet may lead to an increase in the service life of cars and a decrease in the customer satisfaction regarding the vehicles’ consistency with the expectations. Moreover, an extended service life of motor vehicles may have a negative impact on the second-hand sale price of the vehicles concerned.

Environmental risks

Sustainability and related performance concerns have offered a strong foundation for a rapid implementation of a proper climate risk management process. In this respect, Autonom committed to and met the RS2021 statement according to which it announced that it was going to start the process for alignment with TCFD (Task Force on Climate-related Financial Disclosures).

Starting from the specifics of our business and considering the market situation, the regulations and the trends in the field in which we operate, we identified 13 risks and 1 transition opportunity, which resulted from the way in which climate change influences today’s society, such as the development of new regulations to address climate change, the adaptation/lack of technology to cope with new technical requirements resulting from adaptation to climate change, the changes in market dynamics, the changes in consumer interests, the development of new reputation values for companies.

Using recognized databases and platforms for modeling the evolution of climate parameters, we have identified two categories of climate risks with direct effect on our business: acute (short-term effects, generally resulting from extreme climate phenomena) and chronic (long-term effects, generally resulting from changes in the main climate parameters).

After identifying the risks and opportunities and analyzing the potential impacts, we also carried out a series of quantitative assessments in order to determine the appropriate response methods. To this end, we used international platforms specialized in climate projections depending on specific scenarios. The results obtained enabled a better understanding of the specific climate change risks and provided us with a map of climate risks and financial impact scenarios for those physical and transition risks that could affect the Company’s business.

More information on how we carried out the assessment and on the responses determined to address climate risks can be found in the second Sustainability Report, available here.