Risks and uncertainties 

AddLife is affected by general global economic, financial and political conditions. The demand for the Company's products and solutions is due, among other things, to macroeconomic trends. Uncertainty regarding future economic prospects, including political turmoil, could have a negative impact on customers' purchases of AddLife products, which would have a negative impact on the Company's operations, financial position and results of operations.

A significant proportion of the Company's sales are made to publicly funded operations in healthcare, research and care. Weakened government finances could have a negative impact on AddLife's operations and earnings.

Furthermore, changes in the political situation in a region or country, or political decisions affecting an industry or country, could also have a material impact on the sale of the Company's products.

AddLife's subsidiaries operate in a largely or partly non-cyclical market, which generally makes the Group less sensitive to economic fluctuations. In most countries and situations, care is prioritised even in worse times. The fact that operations are conducted in many different segments and geographic markets also limits these risks for the group as a whole.

The decentralised business model means that the group's companies have a good adaptability by making decisions quickly and close to operations. By continuously acquiring companies in new customer segments and in new markets, the group can reduce market risks and better fend off economic fluctuations.

A significant part of AddLife's revenue comes from sales of products to units in the public sector. Political decisions in some countries have led to a reduction in the number of contracting customers by consolidating regions into larger entities. As a result, procurements have become larger and contract periods have often become longer in time, which has led to increased price pressure and competition.

The sale of some of the Company's products is also dependent on different remuneration systems in the different markets. In several of the Company's markets, it is in many cases, for example, the patient's insurance company that, within the framework of existing political compensation systems, finances or subsidizes the purchase of products for the patient's care. Part of the success of sales of AddLife's products in these markets is dependent on whether the Company's products qualify to be replaced within these various compensation systems.

There is a strong focus on public procurement within the organization and at the subsidiaries. Great effort is put into preparing and ensuring compliance with the requirements of the procurements, as well as on training. In addition, the companies have a clearly differentiated offering that creates unique value for the customer, which can provide a less one-sided focus on price and improve competitiveness. This offer is built on deep knowledge of the customer's needs and often consists of unique products with high quality combined with a comprehensive service offer.

The fact that AddLife conducts operations in many different countries and markets limits these risks for the group as a whole.

AddLife's future growth is dependent on, among other things, new innovative products and thus the group's ability to influence, anticipate, identify and respond to changing customer preferences and needs. There is a risk that the subsidiaries within the AddLife group will not be able to implement new technology or adapt their product range and business model in time to be able to take advantage of the benefits of new or existing technology. The costs associated with keeping up with product and technology development can be high. Furthermore, the level and timing of future operating expenses and capital requirements may differ materially from current estimates.

There is a strong focus on proactive business development within the subsidiaries, as well as a focus on future technological adaptation with new acquisitions. In several of the subsidiaries major initiatives in research and development are underway, and collaborations with business partners are initiated as needed to ensure technological developments. Regarding distribution of third-party products, there is a strong ongoing collaboration with suppliers with respect to technological developments.
There is also structured work to identify new suppliers with innovative products. The companies within AddLife are mainly distributors, which provides increased opportunities to adapt to technological development by changing suppliers.

AddLife has a large number of customers of varying sizes, some of whom are public and some private operators. The number of customers and the group structure mean that the agreements with customers are of varying nature in terms of, among other things, contract length, warranties, limitations of liability and scope. Moreover, there is a risk that the variation will lead to unforeseen liability exposures for AddLife, especially in cases where no specific limitations of liability have been included in the agreements. 

Although there are contractual risks associated with the scattered customer base that AddLife subsidiaries have, there are also advantages. An individual subsidiary may be dependent in the short term on a single customer, but AddLife as a Group is not dependent on any single customer and no customer accounts for more than about 4percent of sales. This is a strength in the AddLife business model.

In order to deliver products, AddLife depends on external suppliers who must meet the terms of the agreements regarding matters such as volume, quality and delivery date. Incorrect, delayed or missed deliveries could have a negative impact on AddLife's financial position and results of operations. AddLife has agreements with a large number of suppliers over which the Company cannot exercise control nor can it have full insight into their operations. Consequently, AddLife is exposed to the risk that suppliers could act in a way that could harm AddLife.

In some countries and segments, there is a consolidation where suppliers merge and become fewer and larger. In other countries and segments, streamlining takes place where operations are spun off. In addition, there is a continuous development where new technologies and suppliers establish themselves. In this environment, there is a risk of losing suppliers or that existing suppliers lose market potential.

There is also a risk that suppliers will go from a collaboration with one of AddLife's subsidiaries to another distributor or to their own sales.

In a longer perspective, AddLife is not dependent on any individual supplier for the survival of the business. The company's largest supplier amounted to approximately 7 percent (7) of net sales for 2022. AddLife works strategically with the major suppliers and conducts ongoing supplier evaluations and strives for all suppliers to live up to AddLife's Code of Conduct. 

AddLife's subsidiaries choose suppliers who see cooperation with them as the best sales method. Stable supplier collaborations are also one of the parameters that are evaluated when acquiring companies.

The companies within AddLife work continuously to update supplier structures and to proactively replace lost suppliers and suppliers with decreasing market potential. With AddLife's growing presence in several European countries, the companies potentially become an even more attractive partner to suppliers.

AddLife acquires companies on an ongoing basis and in 2022 5 companies were acquired. However, there is a risk that AddLife will not be able to identify suitable acquisition targets or carry out acquisitions due to, for example, competition with other acquirers or lack of financing.

Acquisitions generally carry risks. In addition to company-specific risks, the acquired company's relationships with key customers, key personnel and suppliers may be adversely affected. There are risks in terms of the ability to retain competence and the possibility of creating a common culture. Moreover, acquisitions could expose AddLife to unknown obligations. In connection with acquisitions, in addition to all assets, the obligations of the acquired company are usually also taken over. There is a risk that not all potential obligations or obligations have been identified before the acquisition or that the seller lacks the financial ability to replace AddLife in the event of a breach of warranty.

It is important that the acquisition process and especially the pre-acquisition evaluation (so-called "due-diligence") is both thorough and effective and includes legal, financial and sustainability aspects. If companies with significant problems are acquired, for example regarding financial earning capacity or important sustainability aspects, AddLife's reputation or financial performance may be worse than expected.

AddLife's acquisition work is ongoing to ensure that there is an inflow of interesting objects into the group.

AddLife has many years of experience in carrying out acquisitions and has a structured process for both acquisition work and integration and follow-up. This process is constantly evolving based on, among other things, lessons learned from previous acquisitions. AddLife's economic and sustainability-related processes and routines are built on long experience and are continuously developed and refined. Guarantees to limit the risk of unknown obligations are one of the tools applied in contract negotiation.

AddLife applies a decentralised organisational model, which means that subsidiaries in the Group are largely responsible for and conduct business independently. Corporate governance in a decentralised organisation places high demands on financial reporting and monitoring, and deficiencies in reporting and monitoring entail a risk of inadequate operational control. The decentralised organisational model has historically been an advantage for the group.  

Group Management controls, checks and monitors the business in the subsidiaries through active board work, group-wide policies, financial targets and instructions regarding financial reporting.

In addition, AddLife works with weekly follow-up of order intake, monthly reporting and follow-up of the financial development of all subsidiaries, 

This means that the parent company has a constant good insight and understanding for current and upcoming challenges and opportunities.

AddLife's continued success depends on experienced employees with specific skills. There are key employees among senior executives in the companies, in group management and among the group's employees in general. There is a risk that one or more senior executives or other key personnel will leave the AddLife group at short notice. If AddLife fails to retain key employees or recruit new competent key personnel in the future, this could have a negative impact on AddLife's financial position and results.

AddLife invests time and effort in the internal competence development and refinement of the corporate culture through the work with AddLife Academy. In the case of acquisitions, the aim is for key employees to remain in the companies and continue to develop the companies' operations and also be given the opportunity for further education as well as career and personal development within the group's framework.    

AddLife conducts an annual employee survey and follows up the results from these to ensure that employees are given the conditions required to develop and thrive at work.AddLife also has an incentive program for senior executives and key employees within the group.

AddLife’s business entails risk associated with product liability. AddLife could be subject to product liability claims if the products that are produced or purchased cause personal injury or property damage. There is a risk that such product liability claims are not fully covered by AddLife’s insurance policy. If a product is defective, AddLife may be forced to recall it. In such a situation there is a risk that AddLife cannot make corresponding claims against its own suppliers to receive compensation for the costs incurred by AddLife due to the defective product.

AddLife works continually with suppliers to increase product safety and ensure that products meet the quality requirements that are in place. AddLife regularly reviews its insurance coverage to reduce the risk of unforeseen expenses. AddLife’s own products are subjected to ongoing quality assessment and follow-up.

New environmental legislation linked to transports and product materials could have an impact on sales for AddLife’s subsidiaries. AddLife owns a few properties and according to the Swedish Environmental Code, a property owner is responsible for any pollution or other environmental damage, with responsibility for remediation, which may also include damage caused by previous operations.

AddLife’s subsidiaries are primarily engaged in commerce and businesses that have a limited direct environmental impact. At the time of each acquisition, earlier environmental impact are noted and reviewed, and contractual protection is negotiated.

An IT incident refers to the risk that critical data or one or more of the IT systems used in any way become unusable, locked, fail or destroyed. AddLife's operations are dependent on the IT systems working and, especially in the event of long-term or extensive interruptions or other IT incidents, there is a risk that certain operations will not be able to be conducted for some time – or in the worst case at all – or will only be able to be conducted with difficulty or at increased costs.

AddLife works with risk assessments regarding IT infrastructure and sensitive data, and has defined processes and controls to protect the company. The control environment consists of firewalls, patch management, virus programs, penetration testing and automatic scanning of incoming and outgoing email traffic to catch phishing. To increase knowledge, encourage caution and ensure that employees know and follow the company's IT policy and directives, training in IT security was implemented during the year.

AddLife's decentralised business model with independent subsidiaries means that only a few companies share an IT platform and infrastructure. This means that the risk of a significant financial impact in the event of a major IT incident for the Group is relatively limited.

The healthcare market is highly regulated in all countries where AddLife operates. The company's product range is covered by legislation, such as EU directives and related requirements for quality systems. 

AddLife puts significant efforts and resources into implementing and applying guidelines to ensure compliance. Annually, audits are carried out by designated accredited bodies to ensure compliance. In 2022, the Company continued its efforts to comply with the European regulatory framework EU MDR, which entered into force in May 2021, and the EU IVDR, which entered into force in May 2022. All of the Group's production facilities are also certified according to the medical device quality standard ISO 13485 and / or the general quality standard ISO 9001.

With operations in more than 80 companies and 30 countries, there are risks linked to unethical or illegal behavior, both within AddLife's companies and among our companies' customers and suppliers. AddLife's continued success is highly dependent on our good reputation and business ethics. Violations of human rights in own or suppliers' operations would have a negative impact on the Group's reputation among employees, customers and other stakeholders and affect demand for the Group's products.

The Group works internally with business ethics through, for example, training within AddLife Academy and annual follow-up of our internal Code of Conduct. In order to ensure the Group's high standards of business ethics, AddLife's Code of Conduct for suppliers shall be followed.

A whistleblowing system was established during the year.