Key Risks

Competition Risk: The Company operates in a highly competitive innovation-driven industry with relatively few entry barriers. With the increasing popularity of e-commerce, other companies can easily utilise online distribution channels and introduce new products in the same markets where MADARA operates. Consumer Preference Risk: This industry is subject to rapid changes in consumer preferences. So MADARA needs to quickly identify and adapt to consumer preferences and trends in the industry. Product Safety and Liability Risk: The Company could face a product liability claim if any of its products cause adverse effects on a consumer.

Regulator y Risk: The companies operating in the cosmetics and personal care industry must adhere to strict environmental regulations affecting their production, distribution, research, and general administration.

COVID-19 Risk: Although the world has adapted to live amongst coronavirus, it continues to have implications for the business environment. As observed in Q1 2022, rapidly increasing COVID-19 rates and severe movement restrictions in Asia are leaving a negative impact on market growth. Strong e-channels are likely to offset the negative impact of partial or full potential temporary closures of shopping centres or cosmetics stores in target markets. Geopolitical Risk: Although the Company neither has a signifi cant market in Russia, Ukraine, and Belarus nor there are direct supply chain impacts, the economic ties have been ruptured by both sided sanctions coming from Russia and Europe that are driving infl ation and burdening customer purchase power, changing product basket preference, and pressuring companies’ profi tability. The extent of warfare and sanction reinforcement directly or indirectly leaves a negative impact on the EU economy and thus MADARA’s main markets. The stress is more observed in Eastern EU markets, but the Company has been rather resilient to crisis. There is a growing concern of economic recession due to disruptions in supply chains, soaring infl ation, and rising central bank interest rates, the sales dynamics could to some extent correlate with general economic trends. Although in the 2020 economic slowdown, MADARA reached one of the highest sales growth rates in the last fi ve years, this geopolitical crisis is different and most likely the governments will not intervene with support measures as it was during the COVID-19 crisis peak.