30. Risk management and internal controls

The Board of Directors of Emmi AG has the ultimate responsibility for risk management, while implementation is delegated to Group Executive Management. Irrespective of the type of risk, there is a generally applicable risk management process. As part of a formal process, significant business risks are assessed in a first process step in workshops and individual interviews, and then analysed and evaluated according to the extent of the potential damage and their likelihood of occurrence. The second process step involves risk management and the creation of a list of measures per risk and risk reporting.

The Board of Directors of Emmi AG discussed and approved the risk assessment in the year under review. It monitors the implementation of the defined measures by Group Executive Management. No exceptional risks that went beyond normal limits were identified during the assessment. The process is repeated annually. The following risks, among others, were identified as significant risks to the Emmi Group:

• Milk price difference internationally: The milk price difference between Switzerland and other countries continues to have a negative impact on the sales of domestically produced products both in Switzerland, as the volume of imported milk products increases, and abroad. This risk is absorbed through targeted and sustainable growth abroad. Any risks related to the international growth of the Emmi Group are minimised by a strict focus on the strategy and its implementation.
• Skills and labour shortage: The skills and labour shortage is intensifying in some of the relevant markets for the Emmi Group. This can lead to vacancies remaining unfilled for longer and increase pressure on personnel costs. Rigorous improvement of our processes, raised automation levels, targeted adjustments to the hiring process and promotion of a unique corporate culture help to mitigate this risk.
• Inflation: Although inflation has normalised in the recent past, it remains at a high level in many of Emmi’s key markets. As a result, numerous input costs have increased significantly in recent years. As a secondary effect, the high inflation rates of recent years have also resulted in an alignment of real wages and thus significantly higher wage costs. If Emmi is unable to compensate for further rises in costs through efficiency gains or higher sales prices in future, or only with a lag, this may lead to a decline in margins.
• Currency risk: Currency movements represent a significant risk for the Emmi Group, and tend to increase based on the continuing internationalisation of business activities. We aim to achieve natural hedges with purchases in foreign currencies. Furthermore, in line with the Emmi strategy, expenditure and production volumes in foreign currency zones are being increased through capital expenditures and acquisitions.
• Price pressure: National and international product tenders threaten in the medium term to result in price erosion, which could lead to a loss of margin mainly for generic products. If the prices of Emmi products remain stable in foreign currency, this may lead to a margin loss. If prices increase, market shares might be lost. However, the successful brand concepts and the well‑diversified portfolio, which is geared toward growing markets and strategic niches, offer long‑term value‑creation potential.
• Trade agreements: The drafting of trade agreements with countries in which Emmi operates presents both opportunities and risks for the company. Switzerland is currently engaged in various talks aimed at negotiating new trade agreements and renegotiating existing ones, but progress is slow. As a result, the Swiss dairy industry is increasingly falling behind its competitors – especially those from the European Union – on the international market in terms of market access conditions. Negotiations that are unfavourable for Emmi could potentially also lead to heavy import pressure in Switzerland. A suspension of the bilateral agreements with the European Union would make it harder for Swiss export products to gain access to the market (e.g. due to the reintroduction of customs duties on cheese), posing a considerable risk. The U.S. tariffs introduced or increased respectively in 2025 also pose a significant risk, as Swiss export products have become substantially more expensive and have therefore lost competitiveness. With the growth and local anchoring of our foreign subsidiaries, this risk is becoming smaller in its effect.
• IT outages: With the growing continuity of processes and increasing penetration and standardisation of IT systems, the extent of damage caused by a potential outage increases. Shutdowns of entire plants can very quickly lead to high losses. With increasing investments in IT security, this risk is continuously analysed and mitigated; however, a residual risk remains.
• Availability of raw materials: In the short and medium term, environmental factors such as animal diseases, poor harvests, water scarcity, or high temperatures can impair the availability of raw materials such as milk, butter, eggs, coffee, or cocoa. In addition, declining milk production for economic reasons may lead to a shortage of dairy‑based raw materials. The potential impacts range from decreasing sales volumes to eroding margins and even operational disruptions. However, these effects can be mitigated through professional procurement, efficiency gains in production, and product innovation.

The Emmi Group is exposed to various financial risks through its business activities, including credit, liquidity and other market risks. Credit risks are managed by means of continual monitoring of day-to-day business and appropriate risk assessment when closing a transaction. Liquidity risk is managed by means of central cash management, which ensures that the planned liquidity requirement is covered by corresponding financing agreements. Other market risks, such as currency and interest rate risks, are partially hedged using derivative instruments. The non-hedged portion is consciously borne as a risk. The currencies of particular relevance to the Emmi Group are the euro, the US dollar and the British pound.

To ensure that the consolidated financial statements comply with the applicable accounting standards and are reported accurately, the Emmi Group has set up effective internal control and management systems, which are reviewed regularly. Accounting and valuation include estimates and assumptions regarding the future. These are based on the knowledge possessed by the respective employees and are regularly examined with a critical eye. Where a financial position includes a major valuation uncertainty that could lead to a significant change in the carrying amount, this uncertainty is disclosed accordingly in the Notes. However, no risks that could lead to a significant correction to the company’s assets, financial position or results of operations as reported in the annual accounts were identified as at the balance sheet date.