Opportunities and Risks

The goal of BASF’s risk management is to identify and evaluate opportunities and risks as early as possible and to take appropriate measures to seize opportunities and limit risks. The aim is to avoid risks that pose a threat to BASF’s continued existence and to make improved managerial decisions to create value. We define opportunities as potential successes that exceed our defined goals. We understand risk to be any event that can negatively impact the achievement of our short-term operational or medium-term strategic goals.

Where appropriate, we measure and manage opportunities and risks in terms of probability and economic impact in the event they occur. Where possible, we use statistical methods to aggregate opportunities and risks into risk categories. In addition, we use a qualitative evaluation scale for opportunities and risks to assess both business and sustainability aspects that cannot be quantified. In this way, we achieve an overall view of opportunities and risks, allowing us to prioritize risks at Group level and take effective risk management measures.

Overall assessment

For 2024, we anticipate that global economic growth will slow slightly as a result of higher inflation – albeit lower compared with 2023 – and persistently high interest rates. General macroeconomic uncertainty will remain exceptionally high.

A further escalation of current geopolitical conflicts could lead to disruptions in global supply chains and greater restrictions on the supply of energy, industrial raw materials and intermediates. The wars in Ukraine and the Middle East pose significant risks for market development and the supply of raw materials in Europe.

Furthermore, there are risks to demand due to high interest rates and consumers’ reduced purchasing power. Opportunities will arise in particular from stronger growth in demand resulting from better macroeconomic development than assumed.

In addition to the uncertainties surrounding market growth, material opportunities and risks for our earnings arise from margin volatility. To assess the opportunities and risks arising from the volatility of market growth, margins and currencies, we switched to forward-looking market-related assumptions in 2023 in order to reflect the specific expectations of the market. In previous years, this was based on historical volatilities with a greater fluctuation range.

According to our assessment, there continue to be no significant individual risks that pose a threat to the continued existence of the BASF SE or the BASF Group. The same applies to the sum of individual risks, even in the case of a global economic crisis.

Ultimately, however, residual risks (net risks) remain in all entrepreneurial activities that cannot be ruled out, even by comprehensive risk management.

As a non-integral shareholding, income from Wintershall Dea AG, Kassel/Hamburg, Germany, is reported in net income from shareholdings. The opportunities and risks resulting from the shareholding in Wintershall Dea are therefore not included in the outlook for the EBITDA of the BASF Group. Opportunities and risks that have an impact on net income from shareholdings and cash flow from the shares in Wintershall Dea are monitored and tracked through BASF’s involvement in the relevant governing bodies as a shareholder.

• For more information on the non-integral, equity-accounted shareholding in Wintershall Dea, see Note 10 to the Consolidated Financial Statements