Risks Related to Regulatory Environment & Overall Statutory Framework
A total of 31 (2020: 33) risks were identified in this risk category. With the exception of the two amber risks mentioned above, “unfavorable exchange rate developments” and “adverse structure of CO₂ tax,” none of the risks would have a material impact on Vonovia’s business development and are classified as green risks as a result. Based on our current assessment, we have classified the previous amber risk of the “nationwide introduction of a ‘rent freeze’” as obsolete.
In addition to the risks associated with the statutory requirements on how rent levels are set, there are a number of risks resulting from possible changes to the other overall statutory conditions that are relevant to our business. Changes to tax provisions, for example, could result in a higher current tax obligation. Similarly, further changes regarding the extent to which operating and ancillary expenses can be passed on could result in higher property management expenses or lower income in our Value-add Business. We do not expect these risks to have a material impact.
The public political debate surrounding housing availability and price trends is translating into efforts to expropriate housing portfolios. We assess this risk as being associated with a low amount of loss and believe that it is very unlikely to materialize.
In order to be able to pick up on potential changes in the overall statutory framework early on, Vonovia is involved in active dialog with policymakers and other stakeholders. Vonovia is also represented in associations and monitors the legislative procedure and recent court decisions on a regular basis.
Breaches of provisions concerning special contractual rights (Social Charters) can come hand-in-hand with risks. While we have assigned a significant amount of loss of € 100–250 million to these risks, we consider them very unlikely to materialize.
Vonovia’s stock exchange listing means that it is subject to disclosure obligations. Failure to comply with these obligations is associated with both financial risks and risks of reputational damage. While we have assigned a significant amount of loss of € 100–250 million to these risks, we consider them very unlikely to materialize.
Long-term economic slumps triggered by macroeconomic and geopolitical risks, such as escalating trade conflicts, the economic impact of the coronavirus pandemic or foreign policy conflicts, could have an adverse effect on the overall conditions for Vonovia. We currently assess this risk as being associated with a substantial amount of loss of € 25–100 million, but believe that it is unlikely to materialize.
Breaches of the Code of Conduct, the Anti-Corruption Policy and legal requirements relating to bribery and corruption could entail risks for Vonovia. We currently assess these risks as being associated with a low amount of loss and believe that they are very unlikely to materialize.
Material impact of legal disputes can entail risks for Vonovia. We currently assess these risks as being associated with an amount of loss of € 25–100 million and believe that they are unlikely to materialize. We have also assessed existing risks from legal disputes regarding a property in Nuremberg as being associated with a potential amount of loss of € 5–25 million and believe that it is possible that these risks will materialize.
Failure to comply with working conditions that are required by law, such as minimum wage standards, safety standards, etc. as well as failure to respect human rights in the supply chain could result in risks for Vonovia. We currently assess these risks as being associated with a low amount of loss and believe that they are very unlikely to materialize.