Country Risk

Pirelli implements a “local for local” strategy by setting up production sites in rapidly developing countries to serve local demand at competitive industrial and logistic costs. In the context of an economic slowdown, this strategy improves Group competitiveness in the face of resurgent trading blocs and growing protectionist measures (customs barriers or other measures such as technical prerequisites, product certification, and administrative costs connected with import procedures, etc.). The Pirelli Group adopts this strategy for its operations in countries, where the general political and economic context and tax systems might prove unstable in future.

Below is an indication of the countries where Pirelli operates.

The different colors represents the so called "country risk" (source: IHS Global Insight, August 2012), which is a measures of risk that takes into consideration the economic, political and security sphere.

The political or economic instability of these countries might have a negative impact on the Group’s earnings and/or financial position. In particular, the geopolitical crisis that has flared up in Egypt interrupted production for about one month in both 2011 and 2012. The situation steadily returned to normal with full resumption of operations at the Alexandria plant and exports, which was made possible by the implementation of a crisis management procedure designed to protect personal safety and corporate assets.

In order to adopt prompt (or even preventive, when possible) measures to mitigate the possible impact stemming from changes in the local context, the Group constantly monitors the evolution of political, earnings, financial and safety risks associated with the countries where it operates. Moreover, in situations where the production capacity of certain factories is underutilized, production can be reassigned from other Group plants.

Last Revised: 11 Jun 2013