Opportunity and Risk Management

We comment on expectations of the medium-term development of the economy and the potential impact on our company, while taking account of the opportunities and risks, in the section on “Opportunities and Risk Report, Guidance” of our  Annual Report 2023.

Differentiation between risk and opportunity management

We treat risk and opportunity management separately as a matter of principle. A separate reporting system documents the risks and facilitates monitoring them. By contrast, recording and communicating opportunities forms an integral part of the management and control system that operates between our subsidiaries/associated companies and the holding company. The identification, analysis and implementation of operational opportunities are directly incumbent on the management of the individual companies. Together with the holding company of the Group, goal-oriented measures are devised to reinforce strengths and to tap strategic growth potential.

Opportunities and opportunities management

The ongoing monitoring and analysis of the relevant developments affecting the products, technology, markets and competition in the environment of the Group companies are an integral part of opportunity management dedicated to ensuring that we can identify, seize and realize opportunities.

Our group and management structure that is aligned to efficient and effective structures and workflows forms an important basis for the consistent leveraging of potential. This allows us to seize market opportunities more swiftly and in a more selective manner against the backdrop of a challenging and dynamic environment.

Business opportunities are to be specifically used under the aspect of sustainable profitability. We are concerned not only with measures to promote organic growth but also with investigating new business models, and we screen external options with regard to their potential contribution to securing the Salzgitter Group's success.

As part of developing the “Salzgitter AG 2030” Strategy, opportunities were identified for the Group and integrated into the corporate strategy as Strategic Directions for all business units. We see opportunities particularly in the fields described in the following.


The Salzgitter Group considers that the steel industry’s decarbonization harbors huge potential. We are setting about tapping this potential through our SALCOS® transformation program.

As part of the overall discussion in society, the topic of sustainability in the value chain is becoming increasingly important in the procurement decisions of many companies. In the view of many of our customers, substituting energy- and carbon-intensive gray steel for green steel is an important lever in reducing their carbon footprint in the upstream value chain (Scope 3 emissions) and for achieving their own sustainability goals. We therefore consider that possible surplus demand for green steel will present opportunities, particularly in the first years following the transformation of our sector. The keen interest of our customers from various sectors in being supplied with low carbon steel at an early stage, manifesting in further partnering agreements concluded in the financial year 2023, corroborates our assessment.

Circular Economy

Our “Salzgitter AG 2030” corporate strategy encompasses the concept of a circular economy as a key component. With this in mind, we develop circular networks with customers, suppliers and process partners along the entire value chain. In terms of achieving our goals of expanding our scrap recycling activities and benefiting from the anticipated increase in global demand for metal scrap, we consider ourselves well-positioned through our subsidiary DEUMU Deutsche Erz- und Metall-Union GmbH.

Along with the innovative design of recycling compatible packaging, the Technology Business Unit makes a contribution to the circular economy by refurbishing machinery and equipment, thereby tapping into the opportunity of benefiting from the trend toward sustainable business models and growth.

Process technology development

We anticipate further opportunities in intensifying vertical production in the Steel Production Business Unit for our core customer segments of automotive and household appliances. This approach will enable us to put our target customer base on a broader footing, which may also generate potential for the future sale of low carbon steel products.

Energy transition

In the Steel Processing Business Unit, we see opportunities most particularly in the context of the energy transition and the associated investment in the infrastructure. We already operate in this field in the wind industry as a supplier of heavy plate for foundation structures and wind turbines. The line pipe business is set to benefit from the necessary expansion of Europe’s hydrogen infrastructure and the solutions required for transportation and carbon capture and storage.

Expanding our global presence and technological innovations

A strategic thrust of the Technology Business Unit lies in expanding the KHS Group’s global presence with a view to guaranteeing the service business that is so relevant for customers. Furthermore, additional market shares are to be won in the standard business by consistently implementing technological innovations in development – for glass product lines, can lines, as well as PET lines.

Risks and risk management

Business activity makes risk taking unavoidable in many instances, as this is frequently a precondition for exploiting opportunities. As far as possible, all relevant risks must therefore be containable and kept within certain limits by the management of the company. For this reason, foresighted and effective risk management is an important and value-creating contribution of management that is geared toward safeguarding the company as a going concern, along with our investors’ capital and jobs.

In organizational terms, our risk management reports directly to the Executive Board. The Executive Board bears overall responsibility and decides on the organizational and operational structure of risk management. The Board approves the results of risk management that are documented and integrates them into managing and controlling the company. As an independent authority, Internal Audit examines the systems used throughout the Group in terms of their adequacy, security and efficiency and provides impetus for their further development as and when required. The effectiveness of our risk management system is constantly reviewed by Internal Audit and is regularly monitored by the Supervisory Board’s Audit Committee.

In order to achieve its objectives of effectively managing and ensuring that corporate governance principles and the statutory requirements are observed, Salzgitter AG pursues the Three Lines Model.

The first line of defense rests with the management of operations that is responsible for managing and controlling the risks arising in this area and dealing with them. The second line of defense lies in risk management. Internal Audit acts as a third line of defense in its role as an independent monitoring body reporting to the Executive Board.

Qualified top-down set of rules and regulations

The management holding company is tasked with putting risk management guidelines in place to form the basis on which a uniform and adequate handling and communication of risks can be ensured throughout the Group. We communicate the relevant concept to our subsidiaries and associated companies with the aid of a risk policy. This policy sets out principles concerning the

  • identification,
  • assessment,
  • dealing with risk,
  • communication and
  • documentation

of the risks in order to standardize them throughout the Group and to guarantee the informative value for the entire Group. We develop our risk management system (RMS) on a steady basis in response to requirements. We expanded our governance risk management in 2022 against the backdrop of the growing significance of sustainability topics.

We include all the consolidated companies of our business units in our risk management. We limit the risks arising from joint ventures in which we do not hold a majority stake by way of appropriate reporting and consultation structures, through participation in supervisory committees and through contractual arrangements. Members of the Executive Board of Salzgitter AG are, for instance, represented on the Supervisory Board of EUROPIPE GmbH, a joint venture, and Hüttenwerke Krupp Mannesmann GmbH. Moreover, on the reporting date, one Executive Board member of our company served on the Supervisory Board of Aurubis AG, a participating investment of ours. The anticipated economic development of these investments is regularly integrated into our Group forecasts.


A risk within the meaning of risk management in the Salzgitter Group is defined as potential damage that has not yet occurred and has not been factored into a Group company’s planning or forecast. With risk management within the Salzgitter Group in mind, situations are analyzed in the business units that we have not yet incorporated – or been able to incorporate – into our planning or in our forecast. We have drawn up a checklist that can be used to identify risks. The companies’ risk managers appointed by the respective senior management teams ensure an ongoing process by incorporating the respective risk owners. At the same time, the various situations are assigned to risk types. In the Salzgitter-Group we categorize the risk types as follows:

strategic/political risks,
performance risks,
financial risks and
general risks.

In terms of the strategic/political risks, environmental and energy policy risks are a focus for our Group.

The area of performance risks within the Salzgitter Group primarily addresses the main price and procurement risks from the raw materials and energy required, above all in the Steel Production and Steel Processing business units. This group of risks also includes production downtime risks relating essentially to key plant equipment and machinery such as the rolling mills.

The economic risks – essentially interest rate and currency risks, as well as liabilities and liquidity risks – for companies belonging to the corporate finance and fiscal group are coordinated and controlled by the management holding across all business units.

In order to ensure a fundamental methodology, we record and monitor mandatory risks for a series of risks – irrespective of the amount of loss – such as performance risks, for instance, arising from sales, procurement, stocks and production downtime. Experience has shown that this selection covers the main risks in our Group’s risk portfolio.


So as to be able to assess the risks, we generally evaluate the threat scenario, while taking all factors of influence into account. Assessing the individual specific risks is the responsibility of the risk owner in consultation with the risk manager. All risks identified are reviewed at least once a year in terms of their potential loss and loss amount – defined as the divergence from the forecast or anticipated result – and the probability of their occurrence along the planning horizon. We assign the probability of occurrence to five categories:

  • very unlikely,
  • unlikely,
  • rather unlikely,
  • likely and
  • very likely.

Risks in the first three categories are events that, after careful commercial, technical and legal consideration, are deemed unlikely to occur. In the case of risks in the risk categories above these, loss accruing to the company from an undesirable event can no longer be ruled out.

With regard to the extent of loss or damage, we distinguish between major risks in excess of a gross amount of at least € 25 million and other risks involving loss or damage of less than a gross amount of € 25 million. We consider this categorization as suitable since, in the recent past, we have also reported financial years with pre-tax results around breakeven. With a view to consistent application, these figures will be retained. Major risks include a number of risks that are of particular significance for the Salzgitter Group. Such risks include the development of prices in the sales and procurement markets, freight rates, along with energy prices and exchange rates (above all, USD/EUR). Owing to their significance, these risks are monitored at short intervals in each month and are therefore consistently integrated into the forecasts.

Risks from loss or damage and liabilities claims, for example, fire and operational downtime, covered by our insurance policies are not recorded.

In deriving net loss from gross loss we take account of all measures to contain loss. In the event, provisions and valuation allowances reduce the amount of loss, which is noted in the risk documentation.

For the Salzgitter Group, we regard risks entailing a loss of at least € 25 million and categorized as “likely” or “very likely” in terms of their probability of occurrence as significant and quantify them. For reasons of caution, we also include risks that are “rather unlikely” in these considerations.

In addition, we conduct a risk tolerance analysis at Group level that we use to compare our aggregated risk position and risk tolerance, which then is incorporated into the overall statement on the Group’s risk position.

Risks with ESG relevance are initially measured qualitatively with the aid of the ESG Risk Committee and the risk owners in the holding company and Group companies regarding probability of occurrence and amount of loss or damage. Physical climate risks were analyzed by Central Risk Management across all the Group companies. At the time when the Non-Financial Report 2023 was being drawn up, the Salzgitter Group had not identified any material non-financial risks. For more information on ESG risks, we make reference to our Integrated Risk Management in the Non- Financial Report.

The development of prices in the sales and procurement markets, of freight rates, along with energy prices and exchange rates (above all, USD/EUR), is particularly important for the Salzgitter Group. At present, and as far as is discernible, we could still be confronted with the economic impact of geopolitical conflicts, along with volatility on the commodities and energy markets, accompanied by higher inflation rates. The effect on earnings from the risks arising from these scenarios has been factored into the earnings forecasts for the companies in the current year and in the forecast to the extent foreseeable.

Dealing with risk

We incorporate risks as an integral part of our intra-year forecasting as well as our medium-term planning. We have defined a set of different procedures, rules, regulations and tools with the aim of avoiding potential risks and of controlling and managing the risks that arise and taking preventive measures. A critical component for risk mitigation is our Internal control system. As a result of the high degree of transparency achieved with regard to developments that involve risk, we as a Group are able to take appropriate countermeasures and implement them in a targeted manner at an early stage. The conditions that must be fulfilled for these measures to be effective are documented, periodically examined and updated if necessary.

Communication and documentation

We use our groupwide reporting system to ensure that Group management is provided with the necessary and pertinent information. Risks are reported to the Executive Board in accordance with the reporting thresholds. Reports are submitted i.a. at the meetings of the Group Management Board that take place every two weeks, in the form of monthly controlling reports, controlling and planning deliberations throughout the year and on an ad hoc basis. The ad hoc obligation to report to the Executive Board comes into play if risks exceed the threshold of € 25 million for the first time (irrespective of the probability of occurrence) and/or € 2.5 million (in the case of a likely and very likely probability of occurrence). We analyze and assess the risks at Group level, monitor them punctiliously and, especially in the case of risks necessitating urgent action, align them to our overall business situation.

For its part, the Executive Board reports to the Supervisory Board on the risk position of the Group as well as – where appropriate – on the status of individual risks. The Supervisory Board has formed an Audit Committee that is tasked with addressing issues relating to risk management in its regular meetings.

We document the measures that have been and would need to be taken for evaluating and overcoming the risks and report on this as described below.