Report 2025

Report on Risks and Opportunities
To safeguard its long-term success, Škoda Auto systematically identifies, anticipates, and manages the potential risks and opportunities associated with its business activities. It does so through comprehensive risk-management and internal-control systems (RMS/ICS), supported by business continuity management (BCM).
The core purpose of the RMS/ICS framework is to ensure the early detection of potential risks, enabling the Company to take timely countermeasures, prevent possible damage, and minimise risks that could threaten its operations. Given the inherent uncertainty in forecasting future developments, the RMS cannot foresee every risk, just as the ICS and BCM cannot fully prevent disruptive incidents from occurring.
Structure of the risk‑management and internal‑control systems
At Škoda Auto, the RMS/ICS framework is centrally coordinated by the Governance, Risk & Compliance Department in cooperation with the Controlling and Accounting Departments. The principles, responsibilities, and individual components of the system are governed by a unified Volkswagen Group directive, including the relevant methodological guidelines, drawing on the internationally recognised COSO enterprise-risk-management framework. Overall responsibility for the functioning of the risk-management system, the day-to-day implementation of which is decentralised, rests with the Škoda Auto Board of Management.
Each organisational unit is required to identify and assess risks annually, considering their potential negative impact on the unit’s own objectives and on those of the Company as a whole. Risks are evaluated on the basis of potential financial loss, reputational impact, legal consequences, and other significant factors. Appropriate countermeasures are then introduced to reduce either the likelihood or the impact of those risks, and these measures are reviewed regularly by senior management.
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The internal-control system underpins the continuous execution of control activities, with quality and professional standards embedded in the unified Volkswagen Group methodology. Key benefits include the clear allocation of competencies and responsibilities, increased transparency across organisational hierarchies, and a stronger understanding of the Company as a process-driven enterprise.
Škoda Auto also engages in business continuity management (BCM), designed to enhance resilience and strengthen the Company’s ability to respond to disruptive situations. While BCM cannot fully prevent business interruptions, it does ensure that essential processes can continue at predefined minimum levels in the event of outages or resource shortages, providing concrete and workable backup solutions for critical activities.
Emissions legislation
One of Škoda Auto’s key risks is the potential to exceed statutory limits on average CO2 emissions, particularly in the member states of the European Union, as well as in Iceland, Norway, Switzerland, and the United Kingdom. If these limits are breached, the European Union may impose penalties of €95 for every gram of CO₂ above the threshold per vehicle sold in the relevant calendar year. Even with all the technical measures that have been planned and approved, meeting the required targets remains uncertain, largely because demand for fully electric vehicles is growing only slowly.
Economic, political, and legislative risks
As both an exporting company and a local manufacturing operation, Škoda Auto is exposed to global and European economic conditions, as well as to the specific dynamics of individual regions. Key influencing factors include economic cycles, the political environment in the countries where the Company operates, and legislative developments such as new EU regulations.
Demand risks
Intensifying competition in the automotive sector, together with the transition to electromobility, requires strong sales support. Market risks are further exacerbated by shifts in consumer demand, where purchasing behaviour depends not only on objective factors such as real income, but also on subjective perceptions and the regulatory conditions of individual markets. Škoda Auto continually analyses these influences and implements measures to mitigate the risks identified.
Procurement risks
Close and efficient cooperation between vehicle manufacturers and their suppliers involves procurement risks that can disrupt production continuity and potentially cause significant financial losses. These risks include delays or non-delivery of goods, quality defects, and, in extreme cases, supplier insolvency and withdrawal from the supply chain. Additional risks stem from the intense competition within the supplier industry. To mitigate these risks, Škoda Auto diversifies its supplier base for assembly components, allowing it to respond flexibly to adverse developments.
Financial risks
Financial risks and their management are among the most closely monitored areas at Škoda Auto. The most significant exposure concerns fluctuations in foreign-exchange rates and their impact on cash flows, financing, and the Company’s overall economic performance. Risks and effects arising from exchange-rate movements are regularly monitored, assessed, and managed using standard hedging instruments. The approval of specific hedging products and strategies lies with internal and Group-level committees.
Research and development risks
New products carry the risk of being received cautiously by customers. To minimise this, Škoda Auto undertakes extensive analyses and customer surveys that help to identify trends at an early stage and verify their relevance for target groups. The risk that new-product launches may not be delivered within the planned timeframe, to the required quality, or at the target cost is reduced through continuous project management and systematic comparison of actual progress with project plans. Where deviations occur, the necessary corrective measures are implemented without delay.
Quality risks
Škoda Auto places a strong emphasis on maintaining a robust quality-management system that complies with ISO 9001 and reflects current requirements in digital technologies, cybersecurity, and sustainability. From the initial stages of product development, the Company focuses on customer satisfaction and the early identification of potential quality issues, thereby effectively minimising the risk of production delays. This proactive approach is reinforced by systematic use of risk-analysis tools, an integral part of the ISO 9001 quality-management framework.
As digitalisation accelerates, cybersecurity has become a critical element of risk management. To safeguard the security and integrity of corporate systems, the Company regularly updates its cybersecurity procedures and pays particular attention to managing the risks associated with vehicle cybersecurity and software updates.
To maintain high standards and retain customer trust, compliance with global and national regulatory requirements is essential. Processes are regularly reviewed to ensure alignment with the latest legislation and standards.
ISO 9001
Human‑resources risks
The rapid evolution of the automotive sector and growing competitive pressures require the Company to secure a competitive edge through a stable, highly skilled, and adaptable workforce in both direct and indirect roles. To support this aim, the People and Culture Division has adopted a long-term strategy covering the entire human-resources lifecycle – from workforce planning and recruitment to training, motivation, and remuneration. Thorough analysis and prevention of potential risks are equally essential. Key risks include the loss of qualified personnel responsible for critical business processes, risks stemming from legislative change, legal risks, and risks associated with long-term demographic developments.
Information technology risks
As a global business focused on growth, Škoda Auto attaches increasing importance to information technology (IT). This area carries risks that may include unauthorised access to data, misuse of the Company’s sensitive electronic information, reduced system availability, or failure to comply with regulatory requirements (such as the GDPR). The Company pays particular attention to the risk of unauthorised access to data, applying a range of measures that address personnel and organisational structures as well as applications, systems, and data networks.
Legal risks
Škoda Auto distributes its products and related services to dozens of countries worldwide and collaborates with a wide range of suppliers of goods and services, particularly in development, production, and logistics. These activities naturally involve the risk of legal disputes with distributors, suppliers, employees, investors, or customers, as well as the risk of administrative proceedings connected to different areas of the Company’s business activities.
Other operational risks
Beyond the risks already identified, certain influences remain inherently difficult to anticipate yet carry the potential to affect the Company’s future trajectory. These include natural disasters, epidemics, acts of terrorism, and other disruptive events with global or regional impact.
Opportunities and resources
Škoda Auto counts its strong, well-established brand, extensive customer base, and mature dealer network among its core strategic resources. Enduring customer relationships, supported by a comprehensive network of sales and service partners, foster long-term satisfaction and deepen trust in the Škoda brand, strengthening the Company’s position in global markets.
A further essential resource is the deep expertise of its research and development teams, which enables the Company to deliver innovation, respond to shifting market needs, and reinforce its long-term competitive edge. Synergies within the Volkswagen Group also play a significant role by facilitating the efficient sharing of technologies, production platforms, and innovations. These synergies allow the Company to optimise costs, accelerate new-product development, and improve the efficiency of its research and development processes.