The market for security and access solutions is in transformation. Megatrends such as the need for safety & security, urbanization, and sustainability , as well as new technological opportunities connected to the progressing digitalization, are driving demand but also require new solutions. Increasing digitalization of services, often cloud-based, is transforming our relationship with our physical surroundings. Patterns of work and travel have adapted to new, post-pandemic norms, and the need to reduce carbon emissions is becoming a global imperative. dormakaba continues to invest significantly in innovation, product development, and sustainability in order to exploit the growth opportunities brought by these megatrends, and to defend its innovation leadership. Read more on innovation in the chapter here.
Opportunities also arise from the ongoing and anticipated consolidation of the industry in which dormakaba operates. Despite the consolidation that has already occurred, the market for security and access solutions remains highly fragmented: The three biggest companies in the industry together account for only about one third of market share. dormakaba plans to further strengthen its market position and will therefore continue to play an active role in industry consolidation.
dormakaba is already a global leader in security and access solutions. Its commitment to innovation and sustainability will help it maintain and improve that position as the industry consolidates. Its business is characterized by high resilience and barriers to entry as well as strong profit pools. Digitalization, country-specific regulation, complex system integration, and continuing after-sales service all contribute to customers’ need for a close and continuing partnership with their chosen supplier. As a trusted innovator, with a comprehensive solutions portfolio, broad and deep global market presence, and strong pricing power, dormakaba is well-positioned to anticipate, influence, and participate in all significant developments in the building industry.
The company’s brands are key assets in its business development as they play a significant role in creating customer loyalty and differentiation. The company’s main brand “dormakaba” is well-known and appreciated in the market for seamless flow and integrated access. It emerged from the combination of the renowned brands Dorma and Kaba following the merger in 2015. In addition, segmentation through a limited number of strong regional, local, and independent brands help the company to improve channel penetration and market reach. This is why the company’s brand portfolio, beside the main brand dormakaba, includes constituent brands such as Best, Alvarado, Kilargo, and Groom that are well-established in the market and inspire long-term customer loyalty. The Key Systems and Movable Walls businesses are managed under separate brands Dorma Hüppe, Modernfold, Skyfold, Silca, and Ilco.
dormakaba operates in an international business environment that is exposed to a variety of risks. dormakabaʼs risk policy provides a comprehensive framework to identifying, assessing, and mitigating risks effectively, ensuring the resilience and success of our operations and objectives. The overriding goal of the risk policy of dormakaba is to secure the future development of the Group, to achieve sustainable profitable growth, and thus to increase enterprise value. In the course of its business activities, dormakaba is exposed to the general risks inherent in any entrepreneurial operation, and these may impede or prevent the achievement of its goals. In this context, opportunities to be utilized to meet or exceed planned targets are analyzed to identify and assess the risks they bring about. In the course of business, these risks are monitored and managed carefully, and their mitigation plans are continuously adapted to changes.
dormakaba always takes strategic and operational decisions on the basis of a systematic analysis and evaluation of the opportunities and risks relating to its assets, financial position, and earnings. It avoids risks that are assessed to be incalculable, unreasonably high, or existential.
Opportunities, as understood in the Group’s opportunity and risk policy, are chances to use events, developments, or active operations to achieve or exceed planned quantitative and qualitative objectives. Risks, as understood in the risk policy of dormakaba, are all those internal and external events and developments that could have a negative effect on the Group’s planned economic success. In addition to direct, quantitatively measurable risks, qualitative risks, such as reputational risks, are also taken into account.
The overriding aim of dormakaba is to sustainably increase its enterprise value (see also section Goals and Strategies). Active risk management supports the company’s management in achieving this goal.
Opportunities and risks should be identified at an early stage and actively controlled. To do this, dormakaba has implemented a comprehensive risk management system.
In line with the Swiss Code of Obligations, dormakaba has implemented an Internal Control System (ICS) based on the consolidated (Group) accounting (see bullet points below). The ICS ensures that business activities are correctly recorded, analyzed, evaluated, and transmitted to the external accounts.
The essential characteristics of the ICS with respect to accounting are:
In addition, statutory and specific internal corporate guidelines and directives are used to ensure that accounting is consistent and proper. The application of clear and consistent accounting rules and a uniform consolidation software tool ensure consistent accounting throughout the Group in line with legal and statutory requirements as well as the chosen accounting framework, Swiss GAAP FER.
Further information can be found in the Corporate Governance Report 2023/24.
Risk management is integrated into the regular business and decision-making processes, codified in internal rules and regulations, and made binding to all Group companies. It includes an impact-focused assessment of risks, implementation of appropriate risk mitigation measures, regular review of identified risks and measures, and transparent reporting of the risk situation. Responsibility for the definition and monitoring of risk management (“risk governance”) lies with the Board of Directors (BoD), while the Audit Committee monitors implementation. Responsibility for implementing and applying the risk management system rests with the Executive Committee (EC) and with line managers throughout the internal hierarchy.
The company’s risk management system distinguishes between operational and strategic risks:
The Group Internal Audit function is responsible for internal audits at dormakaba. Internal Audit reports directly to the Audit Committee, although in functional terms it reports to the CFO. All audits performed in the financial year 2023/24 were in line with the (yearly) audit plan and approved by the Audit Committee.
Our strategy includes active portfolio management, acquisition, and divestments. This creates risks in the evaluation, transaction, and integration of the corresponding entities and assets. To minimize these risks, dormakaba manages the acquisition projects rigorously through standardized due diligence and Post-Merger Integration processes, using well-trained specialist employees and professional support from outside the Group.
In recent years, dormakaba has continued to extend its product portfolio on electronic and cloud-based solutions. Its products are very frequently used in security-relevant applications such as access control systems which are increasingly often connected. dormakaba is therefore more exposed to cybersecurity risks, e.g., hackers gaining unauthorized access to sites and premises protected by dormakaba products, causing damage to the Group’s reputation and possibly exposing dormakaba to liability claims. dormakaba counters the increasing significance of such cybersecurity threats during the product development process by using the latest methods to identify points that could be attacked, and then closing these known vulnerabilities in the hardware and software with upgrades before new products are launched on the market. Equally important, existing products (mechanical, electronic, and cloud-based) are subject to continuous testing to keep them robust against new threats. dormakaba has taken out product liability insurance to be protected against these cyber threats to an extent that is economically reasonable.
Digital transformation is progressing rapidly, and it is essential to the success of dormakaba that it keeps pace with this development. This applies to the Group’s products and their connectivity as well as services, but also to operational processes. Sudden, disruptive developments are not rare these days, and there is a risk that existing competitors or new entrants to the markets of dormakaba could use such disruptive leaps to create significant advantages for themselves. The company’s innovation management team systematically monitors and analyzes the relevant technologies. As part of mid-term planning, targeted analysis of information relating to the state of the market and the competition is conducted to ensure that local peculiarities are also taken into consideration. For dormakaba, as a manufacturer and supplier of high-quality access products and solutions in the premium market segment, the growing pressure on prices in relevant markets and specific product areas also represents a risk. It counters this risk through the targeted development of new products that offer customers a broader range of solutions, services, business models, and continuous improvement in operational excellence (efficiency), thus helping to secure the Group’s market position. This strategy is complemented by elaborate strategic pricing efforts.
A significant risk in product manufacturing is the possibility of a lengthy interruption to operations at one or several of the Group’s worldwide production sites, for example because of fire or cyberattacks. Supplier failure and poor-quality raw materials and components also constitute a risk. Alongside the essential insurance protection, a central goal of the loss prevention programs in place at all manufacturing sites is to minimize these risks. Through these programs, the measures in place to prevent fire are regularly updated, formulated, and implemented. This is a recurring process that includes regular site visits and systematic risk grading analyses, conducted by the company’s global insurance provider who also organizes feedback loops and support in improvement projects. To counter the increasing risk of cyberattacks aimed at information technology as well as operational technology, dormakaba established an information security organization that assesses cyber threats and orchestrates adequate mitigation projects to protect vital assets.
Manufacturing processes create the risk of air and water pollution. To minimize this risk, dormakaba invests continuously in environmental protection measures. Please see the Sustainability Report for specific information about measures and relevant certifications.
As a globally active company, dormakaba is exposed to risks created by the political situation in individual countries and regions, and also to risks resulting from pandemics as well as war and trade conflicts between countries or country groups. Such risk drivers can rarely be influenced. dormakaba carefully monitors such situations and tries to implement prompt and appropriate risk control measures. Its top priority is always to protect its own employees.
Although inflation rates and energy prices have recently declined and supply chain pressures eased, transnational activities may again be negatively impacted by shortages of certain commodities and components and rising input prices, due to potential political uncertainty stemming from, for example the war in Ukraine, tensions related to the Taiwan situation, and the Israel-Hamas war. Inflation has been falling towards central-bank targets, but some pressures persist and, for the time being, the banks’ monetary policies remain on the tighter side.
To adequately react to changes that might occur from a macroeconomic downturn, dormakaba implements state-of-the-art contingency planning to minimize the impact on business operations and supply chains, and thus on customers and employees, while at the same time placing a strong focus on its financial stability. Additionally, scenario planning methods are used to identify organizational and geographic units that provide opportunities for cost reduction measures. The scenarios are also used to find opportunities to introduce new products or fine-tune the business approach to specific markets. Monitoring and re-evaluation of the current situation is institutionalized and repeated at a quick pace to keep up with geopolitical and economic developments. The target is to be and remain capable of reacting quickly and adequately to changes that might occur.
dormakaba’s success depends on skilled and committed employees. The most significant personnel risks therefore involve skills shortage, where vacant positions cannot be filled properly, or competent employees leave the company. These risks are addressed through extensive employer branding initiatives, expanded talent acquisition practices, improved benefits and succession management, and through individual, targeted employee development programs.
With the implementation of the S4G strategy, specific attention is given to ensure social responsibility, particularly during the reduction of employee positions. Effective and fair change management is a high priority, focusing on employee wellbeing during the change process and thereafter. dormakaba also focuses on driving employer branding and ensuring employee engagement in the new locations where employees are being hired. This also includes career path models for certain functions such as product development and IT, as well as remote working models. At dormakaba the attrition rate is closely monitored, and since the beginning of the fiscal year there is a general positive trend towards lower attrition.
The main business processes and customer solutions of dormakaba are supported by IT systems. The failure of these systems and the permanent loss of data through operating or program error, or as a result of increasingly prevalent external influences (e.g., cybercrime), represent a risk. To limit the risk of failure of critical systems and infrastructure, including operational technology (OT) in manufacturing, the company’s IT strategy is to use state-of-the-art protection standards. These are, for example email address validation, client security protection and monitoring, identity and access control management, network security management, network and infrastructure management (including 24x7 monitoring, high-level firewall protection tools, and redundant network connections), special OT cybersecurity measures, and IT continuity operating plans for provision of redundant data and systems. dormakaba uses advanced threat protection solutions and operates a security operations center to further mitigate cybersecurity risks. A global information security management system (ISMS) in accordance with ISO 27001 is in place. Cybersecurity risk awareness training (e-learnings and behavior training on phishing malware) is globally mandatory for all employees with access to corporate IT systems. Additionally, dormakaba has taken out insurance protecting against cyber threats to the extent that this is economically reasonable.
Successful and timely execution of the global IT strategy (standardization of applications and infrastructure) is vital for the company’s future success. Failure could result in the delay of integration projects and underperformance of important business or Group-wide processes, including financial damage.
Mitigation of current risks derived from outdated or out-of-maintenance legacy systems will be driven by a new Group-wide program as part of the ongoing Shape4Growth transformation.
As a globally active group of companies, dormakaba is exposed to the risk of legal disputes involving such matters as product liability, competition and antitrust law, or intellectual property rights. Group-wide standards, training, and controls are in place to mitigate this risk.
International business activities can cause tax-related risks. To identify and manage such tax risks, dormakaba sets directives and manuals based on a defined tax policy approved by the Board of Directors. Intra-Group transactions can raise issues about the correct profit allocation between the involved countries. dormakaba applies the Arm’s Length Principle of the OECD (Organization for Economic Cooperation and Development). The profits are taxed, where the economic value is created. dormakaba files the amount of taxes paid in a yearly CbCR (Country-by-Country Report). All transactions may be subject to export control regulations. Compliance is managed through Group-wide standards, including directives and employee training. The internal Tax department works closely together with the local internal finance and legal organization and consults external advisors in case of need.
All business activities have their compliance risks, especially when the business model involves worldwide production and sales, growth into new markets, and international procurement. Significant compliance risks include bribery and corruption, infringements of antitrust and competition law, fraud, preferential treatment of business partners out of personal motives, and violation of intellectual property protection rights.
The mission of Group Compliance is to support dormakaba management and employees in taking appropriate decisions, consistent with applicable laws and corporate regulations, and in acting with integrity. Its Compliance Management System meets the most stringent certification demands according to best practice standards. Group Directives, Directives, and local guidelines covering the company’s main activities provide a full set of relevant internal rules and regulations and are regularly updated. In addition to mandatory training on the Code of Conduct for all dormakaba employees, those whose roles expose them to specific compliance risks receive further training, e.g. in antitrust and anticorruption measures.
dormakaba is exposed to the various financial risks that are part of doing business internationally, including default on trade receivables, liquidity and credit risks, and pricing risks from interest-rate and currency fluctuations.
The “European Market Infrastructure Regulation” (EMIR), the EU initiative to regulate OTC trade in derivatives, imposes an audit duty. During the annual audit under § 20 para. 1 of the German Securities Trading Act for the audit period from 1 July 2021 to 30 June 2022, it was confirmed that dormakaba has an overall, and in all respects appropriate and effective system for ensuring compliance with the statutory requirements.
Switzerland regulates the OTC trade in derivatives with the Finanzmarktinfrastrukturgesetz (FinfraG). All Swiss-based Group companies classify as “NFC”(small non-financial counterparties) and have signed agreements with their banks regarding the delegation of reporting duties.
The funding for dormakaba Group companies is managed centrally. A five-year syndicated sustainability-linked credit facility, agreed for dormakaba during financial year 2020/21 with a consortium of banks, amounts to CHF 525 million with options to extend by another two years and to increase the facility by CHF 200 million. There are also agreements in place with various regional banks for bilateral credit facilities. dormakaba thus has sufficient liquidity reserves to ensure that even unexpected events do not have a significant effect on its liquidity position. The two CHF bonds – CHF 320 million for 2017–2025 and CHF 275 million for 2022–2027 – ensure a solid and well-balanced mid-term maturity structure for dormakaba’s debt portfolio.
The company’s business model could also give rise to other risks not mentioned so far, e.g. sustainability compliance risks (including compliance with materials restrictions laws or human rights due diligence laws), climate change risks, and liability risks resulting from local laws that are not known at Group level. dormakaba counters these risks by diverse measures, including its sustainability framework and organization, the consistently high quality of its products and services, the engagement of legal experts when the risk of a legal dispute is identified, or by taking out appropriate insurance cover. A full disclosure of climate change-related risks is made available in dormakaba’s annual submission to the Carbon Disclosure Project (CDP) and in the climate risk analysis in the Sustainability Report FY 2023/24 aligned with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).
In conclusion, the company’s opportunity and risk situation can be rated as moderate.
Existing risks are identified and continuously monitored through the risk management system. When necessary, they are hedged using appropriate countermeasures.
With strong brands, the broad existing portfolio, the wide market presence, and with the existing innovation structure and approach, the prospects of further profitable growth for dormakaba remain promising. The Shape4Growth strategy places its focus on customer centricity and accelerating profitable growth, giving dormakaba even more leverage to make use of these strengths.
There is no sign of any risks that would endanger the continued existence of dormakaba. Currently no specific risk has been identified that could significantly affect the assets, financial position or earnings of dormakaba, neither is there evidence of any material liquidity risk. A material deterioration in the future assets, financial position, and earnings is not expected given the current risk situation. This assessment is based on the assumption that no global economic recession hits the markets in the near future.