Exclusive Networks // Sustainability Report 2022

Risks and opportunities Risk factors

Risk related to the supply of products and solutions distributed by the Group

Criticality level: ■ ■ ■

Risk description

Risk management

The Group depends on the sourcing strategy of its vendors of the products it distributes. Since 2020, the supply chains of IT industries (including those of the Group’s partner hardware manufacturers) have been heavily impacted by the shortage of electronic components needed for the solutions distributed by the Group. These solutions are often manufactured in Taiwan and imported from China. For example, Fortinet’s hardware sales (sourcing from Taiwan) represent 15% of the Group’s total 2022 revenue. The shortage of electronic components affected the Group’s supply capacity and caused significant delays in its ability to distribute cybersecurity products and solutions. Additionally, as described in section 2.1.1 which describes the risks related to macroeconomic and political conditions, the increase in inflationary pressure has resulted in a significant increase in freight costs due to the rise in energy costs.

The Group has implemented a number of measures to mitigate this risk:  adjustment of its logistics infrastructure and strengthening of inventory management in conjunction with key vendors, including:  the development of regional inventories for key vendors to improve product availability and cut delivery times,  the safeguarding of transport capacity and service levels and related costs (strengthening of partnerships with carriers with their own aircraft fleet),  strengthening collaboration with vendors in sharing forecast and sales pipeline data to secure product availability;  currency hedging: see below, “Foreign exchange risk” described in section 2.1.3 “Financial risks” of this Chapter 2.

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Exclusive Networks

Sustainability Report 2022

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