Group business routinely encounters and addresses risks, some of which may cause future results to be different than presently anticipated. The information that follows describes risk factors that may impact Group activities and the actions taken to mitigate / remediate their effect on the business.

Prospective Mash Group Plc investors are advised to review the risk factors described herein and the information in this entire section. Additional information can be found in the Annual Report.

Mash Group Plc Risk Exposure

The Group’s risk exposure consists mainly of the following:

  • Strategic and performance risks
  • Financial risk
    • Liquidity risk
    • Credit risk
  • Operational risk
  • Compliance risk
  • Interest rate risk


Mash Group Risk Structure

group risk structure

These risk factors should be read in conjunction with other relevant information in this section and the associated sections of the Annual Report.

Risk Description

Anyone considering investing in Mash Group Plc is recommended to review all of the risk factors described below. The description contains estimates of the current state and future development of the Group which carry risks and uncertainties. Investors should be aware of these when making their investment decisions. Estimates, risk descriptions and listed uncertainties are prepared by the Group’s Board and management and are based on the information available to the Board and management at the time of preparation.

The Group’s management and Board strive to update relevant changes to the Group’s risks without delay in order to keep the risk description current. If realized, the risks may have a negative impact on the Group’s business operations and financial position and the value of the business operations, decreasing the value of the Group’s issued shares and securities. Through its risk management, the Group aims to ensure that the exposure to risks and their potential impact are brought to an appropriate level.

Risk Factors

The Group risk exposure mainly consists of the following categories: strategic and performance risk, credit risk, liquidity risk, operational risk and market risk.

Strategic and Performance Risk
Strategic and performance risks are those, which may impinge on the achievement of the Mash Group’s medium and long-term business objectives. These risks arise from choosing the wrong business strategy or failing to adapt the business to a new operating environment, such as changes in the regulatory environment, new competitive threats or changes in technology.

Mash proactively follows on industry development and innovation, markets and legal changes in the countries it operates in and adjust its operations accordingly. The Group has built solid foundations for executing its expansion plans and hired high profile managers and leaders in 2017 combining expertise and experience from a broad range of industries. To implement its strategic vision, the Group has set itself strategic goals, which are translated to milestone-goals on a timeline of 24, 12 and 3 months.

Credit Risk
The Group is exposed to credit risk, which is the risk of financial loss if a customer defaults to honor its obligations and is not able to repay the credit in full and on time. Credit risk is the main risk for the Group’s business, and calls for a carefully managed the exposure, originating from the unsecured consumer loans.

Mash has built up efficient processes, which define the client risk profile and allow for subsequent monitoring of the client portfolio. The risk profile is established via an innovative credit scoring model based on four components (data provision from the client, verification and consolidation from 3rd party provider, scoring assessment and calculation of the payment reserve), the outcome of which is a credit acceptance or rejection. The scoring model follows a generic process together with adapted specificities for each market. It is re-assessed regularly to evaluate its predictive accuracy.

The Risk and Compliance Committee follows up the performance of the credit scoring model and oversees the strict adherence to the established risk parameters. Any material change to the credit risk policy and deviation to the risk appetite is subject to Risk Committee approval.

Liquidity Risk
Liquidity risk is the risk that the company does not dispose of sufficient cash at hand to settle its payment obligations and or lend money according to the development plans of the business. Liquidity risk normally arises when there is a maturity mismatch between the sourcing of funds and their employment.

The Group funds itself by issuing long-term debt with various maturities and through a contractually secured funding structure to which the Group sells the originated consumer receivables portfolios.

Mitigating the liquidity risk can be achieved by issuing a variety of short to medium term bonds which do mature at various time horizons. Furthermore, in case such issuance of bonds should not be subscribed, the Group may turn to more expensive funding sources and thereby reducing the net interest margin and ultimately the profit of the company. The Group has also the possibility to restrict new credit requests hence reducing the risk of a non-liquidity event.

Operational Risk
Operational risk arise from insufficient or deficient internal processes, human error, external events, IT failures which may result in a financial loss or a reputational damage. Operational risk is managed on a day-to-day basis as part of the Business and management has put in place contingency plans for addressing potential threats. Particular emphasis has been put on ensuring that all the critical functions have sufficient replacement capacity and documentation for smooth knowledge transfer.

System failure, interruption, intrusion with subsequent information breaches could adversely affect the Group’s business processes and the service to its clients. The Group emphasizes information security and has implemented an ISO-certified Information Security Management System.

The Group is also exposed to the risk of operational failure of external service providers as the Group is interconnected with them and relies heavily on communications and information systems to conduct its business. To mitigate the external risk, procedures have been put in place to replace failed services within set time limits.

Investment Risk
Mash Group has made significant investments into systems, processes and know-how in its fields of core competence. The redeemable value compared to the value on the consolidated balance sheet of these investments are subject to risks related to their market value, business volume and performance, among others.

The Group has also made significant investments into its subsidiaries and minor investments into companies outside the Group (Privanet Group Oyj, St1 Nordic Oy). The redeemable value compared to the value on the consolidated balance sheet of these investments are subject to risks related to market value, performance and other business-related risks. 

Mash actively manages its investments to mitigate investment-related risks where possible.

Compliance Risk
The company is subject to consumer protection laws and regulations, and the recommendations issued by consumer protection and other regulatory authorities.

The Group’s foreign subsidiaries observe the laws and regulations of their respective countries and business sectors, instructions of the supervisory authority for the respective company and the company’s Articles of Association. In addition to local laws, the Group companies have been aligning their governance with standards applied by leading financial institutions and best international practices.

The main challenge for the coming years in term of regulatory constraints relates to the revised Payment Service Directive (PSD2). PSD2 is a data and technology-driven directive and has the objective to drive increased competition by facilitating new entries for new providers, innovation and transparency across the European payments market, while also enhancing the security of Internet payments and account access. The Group is seeing this new Directive as a catalyst for growth opportunities and opens up fields for new revenue streams. Mash, like many market participants, has been monitoring this development in 2017 and devised plans to be ready to take advantage from this new regulatory environment.

GDPR, General Data Protection Regulation, sets rules on processing personal data, and the individuals whose data is processed are given certain rights. The regulation comes with the risk of significant financial penalties if ignored.

The Group is able to demonstrate compliance with the regulation. The Group has named a Data Protection Officer, and has processes in place for every country and market. The Group is always open to cooperation with the Data Protection Authorities in each country.

Interest Rate Risk
Changes in interest rates may adversely affect the Group’s operations and revenue. The Group’s performance could potentially be influenced by changes and fluctuations in interest rates in countries it operates in. Interest rate sensitivity refers to the relationship between changes in market interest rates and changes in net interest margins and balance sheet values. Because of the high margin nature of the Group’s business, the market interest rate sensitivity of the Group is low. A mismatch between interest owed by the Group and interest due to it (in the absence of adequate hedging) could have some adverse effects on the Group’s business, financial situation and results of operations.

Risks Associated with Investing in the Company

Credit Risk
Bonds and other investment products issued by the company do not include security of capital or separate collateral. Therefore, the investment products are associated with issuer credit risk. This means that the investor may lose the invested capital entirely or partly in the event of a payment default, need for debt restructuring or bankruptcy for example.

Issuer Risk
The repayment of invested capital and profit carry a risk relating to the issuer’s repayment ability. With the company being the issuer, the issuer risk is comparable to the issuer credit risk associated with bonds (see ‘credit risk’). Issuer risk refers to the risk of the issuer becoming insolvent and unable to meet its obligations. The investor may risk entirely or partly losing the invested capital and potential profit.

Secondary Market Risk
Secondary market risk refers to the risk that when the investor sells the investment before the agreed maturity date, the price may be higher or lower than the nominal value. In this case, the investor may not get back the entire capital invested. Bonds or other investment products issued by the company are primarily intended to be held until their respective maturity date. However, bonds may be sold before their maturity dates. The issuer will have no obligations to repurchase, but a third party can do so. In this case, the value of the investment loan may be lower or higher than its subscription price. Among other matters, the market price is affected by changes in market rates of interest.

With regards to share transactions, these are recorded third-party trades, which the Group has no influence on.

Liquidity Risk
Selling the loan before its agreed maturity date also carries a liquidity risk, meaning that it may be difficult to find a buyer for the loan or that the price offered is lower than the actual value. Major market fluctuations, the closing of trading venues or technical problems may affect the secondary market.

Tax Risk
The investor pays any taxes related to investments in Mash. Tax legislation and local taxation may change, which may have adverse effects for the investor. In isolated cases, investors would be well advised to seek advice from their tax consultant or tax authority.


Important notice

To the extent that any of the information on this part of the website relates to past performance, it should be noted that past performance is not a reliable indicator of future results.