4.6 Financial Risk Management

The Group is exposed to various financial risks arising from its operating and financing activities. To manage these risks, the Group operates a Group-wide enterprise risk management (ERM) system to identify, assess, and monitor risks and related mitigation measures. A comprehensive risk assessment is conducted annually based on defined likelihood and financial impact criteria and submitted to the RAC and the Board of Directors, complemented by a mid-year monitoring update.

Liquidity Risk

Prudent liquidity management involves maintaining adequate reserves of cash and cash equivalents. The Group generates strong operating cash flows, and liquidity risk is considered limited. As at 31 December 2025, the Group held cash and cash equivalents amounting to CHF 92,664 thousand (previous year: CHF 71,485 thousand), representing 5.2 times the average monthly operating expenses (previous year: 4.6 times).

Liquidity risk is centrally monitored and managed across the Group. Potential liquidity shortfalls are mitigated through regular liquidity planning and monthly cash flow analyses. The maturity profile of financial liabilities is continuously monitored and actively managed to ensure timely settlement.

The table below provides an analysis of the Group’s financial liabilities categorised by relevant maturity groupings, extrapolated from contractual maturities of all non-derivative financial liabilities. The amounts presented reflect contractual undiscounted cash flows and include contractual interest payments. The interest payments on variable interest-bearing borrowings shown in the table below reflect the prevailing market interest rates at the reporting date. These amounts are subject to change as interest rates fluctuate.

Financial Covenant

The credit facility is subject to a financial covenant, and non-compliance may result in an event of default. The financial covenant, evaluated on a semi-annually rolling basis, requires the Group to maintain a leverage ratio no greater than 3.25x at each testing date. The Group’s leverage ratio as defined by the financial covenant was 0.8x as of 31 December 2025 (previous year: 1.2x).

Market Risk

The Group assesses the probability and quantitative magnitude of potential financial losses arising from market uncertainties, volatility, or unexpected developments associated with financial instruments.

Currency Risk

The Group generates its income predominantly in CHF, while a small proportion of cash outflows are denominated in foreign currencies, primarily EUR and USD. On a consolidated basis, the currency risk is not considered material. Therefore, the Group does not use financial instruments to manage currency-related risks. Similarly, translation risk related to the assets and liabilities of foreign subsidiaries is limited due to low volumes and is generally not hedged, as it is not considered material.

Interest Rate Risk

The Group’s interest rate risk primarily arises from its outstanding floating rate credit facility, which exposes the Group to fluctuations in cash flows and increased volatility in profit before tax. However, the Group’s overall interest rate exposure remains low relative to profit before tax.

The floating interest rate is determined by both the movement of SARON and a predefined margin, which is influenced by the Group’s leverage ratio (refer to Liquidity Risk). Based on its risk assessment, the Group has not identified a need to use interest rate derivatives to hedge its exposure to floating interest rates.

The following table illustrates the sensitivity to a reasonably possible change in interest rates for the Group’s financial assets and liabilities. All things being equal, the Group’s profit before tax is affected by changes in variable interest rates as follows:

The range between the highest and lowest Swiss National Bank base interest rates observed in 2025 was 0.5%. As this was below the threshold of one percentage point, the Group applied the minimum rate change of ±1% in its sensitivity analysis.

Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk primarily arises from cash and cash equivalents, financial assets and trade receivables, and is limited to the carrying amounts of those assets.

The Group minimises counterparty risk by holding a substantial share of its cash and cash equivalents and deposits with financial institutions that have a Standard & Poor's rating of BBB- or better. Additionally, risks are further mitigated by predominantly working with leading financial institutions based in Switzerland.

A significant portion of the Group’s financial assets, amounting to CHF 4,720 thousand (previous year: CHF 7,298 thousand), comprises loans granted to MEP participants. A qualitative assessment has shown that the credit risk associated with loans granted to selected key employees under the Group’s share-based compensation plan is low. In addition, a total of CHF 914 thousand (previous year: CHF 950 thousand) is held as bank deposits. This primarily relates to the Group’s rental deposit for business premises and is assessed by the Group as low risk.

Financial Risk from Operating Activities and Valuation Allowances

Credit risk on trade receivables arises from the Group’s operating activities. The Group manages default risk through established trade receivables management processes. Default risk is primarily influenced by individual customer characteristics and the industry sectors in which customers operate. Given the heterogeneous customer structure, the Group does not apply general credit limits for trade receivables.

The Group considers credit risk on trade receivables to be limited, as it is not exposed to material concentration risk due to its large and well-diversified customer base. At the reporting date, the largest single customer accounted for 0.9% (previous year: 1.2%) of the outstanding gross carrying amount of trade receivables, while the five most significant customers together accounted for 4.3% (previous year: 4.5%).

In assessing default risk, the Group considers both the business unit in which the customer operates and the ageing profile of trade receivables. The breakdown of trade receivables by aging is as follows:

Allowances for trade receivables are remeasured based on credit loss rates in accordance with the expected credit loss model. Increases and reversals of allowances for doubtful trade receivables are recognised under other operating expense.

Optimisation measures that selected business units implemented in the reporting year, including the expansion of electronic payment methods for certain customer groups, improved the efficiency and quality of payment processes and helped reduce allowances.

The movements in valuation allowances are set out below.