Operational Opportunities and Risks

Market growth

Opportunities and risks arise from the development of our sales markets. For more details on our assumptions regarding short-term growth rates for the global economy, regions and key customer industries, such as the chemicals, automotive and construction sectors, see Economic Environment in 2026.

We also consider opportunities and risks caused by developments that deviate from assumptions. Macroeconomic opportunities arise from an easing of geopolitical conflicts and the resulting increase in the supply of energy, industrial raw materials and other intermediate goods.

Increases in energy prices caused, for example, by the war in Ukraine and the situation in the Middle East, and the higher inflation rates resulting from this for manufacturer and consumer prices pose a risk to the economy. Additional macroeconomic risks result from the escalation of geopolitical conflicts and a further intensification of global trade conflicts, especially between the United States and its trading partners. We constantly monitor these risks and mitigate them as much as possible through our diversified customer and product portfolio and our principle of producing close to our customers and mainly procuring raw materials and intermediate input in the relevant region.

Weather-related influences can result in positive or negative effects on our business, particularly in the Agricultural Solutions segment.

In view of the expected delay in market recovery, the identified market growth opportunities are increasingly taken into account.

Margins

The greatest opportunities and risks for the BASF Group primarily result from higher or lower margins in all segments, particularly the Chemicals segment. Continuing pressure on margins for a number of products and value chains may lead to further declining margins. Additional shortages of raw materials could have both a negative and positive impact on margins. This would have a corresponding effect on our EBITDA. We counter margin risks with ongoing cost and price management as well as process optimization.

The year’s average oil price for Brent crude was $69 per barrel in 2025, compared with $81 per barrel in the previous year. For 2026, we anticipate an average oil price of $65 per barrel.

Compared with the previous year, we see lower margin risks.

Competition

We continuously enhance our products and solutions in order to remain competitive. The market entry of new competitors and increased price pressure may lead to lower margins and volumes, particularly in the Agricultural Solutions and Industrial Solutions segments. We counter these risks through our margin management and other measures, such as the targeted promotion of innovations, for example in the area of sustainability.

Possible supply problems and the withdrawal of some competitors due to the current difficult market environment may give rise to opportunities that we can use to our advantage.

Compared with the previous year, we see greater opportunities for competitiveness.

Regulation/policy

Risks for us can arise from intensified geopolitical tensions, new trade sanctions, a lack of global coordination for stricter emission limits for production plants and stricter energy and chemicals legislation as well as a lack of social acceptance of new technologies, particularly in the EU. Furthermore, risks can also arise from regulatory delays in the expansion of capacities and infrastructure for electricity from renewable sources, the necessary CO₂ infrastructure and delayed product approvals.

However, regulatory measures and societal expectations can also give rise to opportunities. For example, we view initiatives around the world to increase energy efficiency and reduce greenhouse gas emissions as a strategic opportunity for increased demand for products such as our insulation foams for buildings, catalysts, battery materials for electromobility, or our solutions for wind turbines (for more information, see General Disclosures).

Procurement and supply chain

Operational risks in procurement are a key topic for BASF, as they can impact the company’s supply capability and therefore its competitiveness. Operational risks in procurement include disruptions and delays in the delivery of raw materials due to supplier insolvencies, quality concerns, extreme weather or geopolitical events, for example. To counter these risks, BASF relies on comprehensive risk assessment and control along the entire supply chain, global diversification and close cooperation with suppliers (for more information, see S2 Workers in the Value Chain).

Compared with the previous year, we see lower risks in the supply chain.

Investments/production

We try to prevent unscheduled plant shutdowns by adhering to high technical standards and by continuously improving our plants. We reduce the effects of an unscheduled shutdown on the supply of intermediate and end products through diversification within our global Production Verbund.

In the event of a production outage – caused by an accident, for example – our global, regional or local emergency response plans and crisis management structures are engaged, depending on the scope of impact. Crisis management teams at country level not only coordinate the necessary emergency response measures, they also initiate immediate measures for damage control and resumption of normal operations as quickly as possible.

Crisis management also includes dealing with extreme weather conditions such as hurricanes (for example, at the sites in Freeport, Texas, and Geismar, Louisiana) or significantly elevated water temperatures in rivers due to extended heat waves, which limit the available cooling capacity. Appropriate precautions are taken at the sites in the case of a change in risk associated with climate change. For example, due to an increase in heat waves, we have implemented several measures at the Verbund sites in Ludwigshafen, Germany, and Geismar in recent years to increase cooling capacity, such as expanding and optimizing the central recooling plants and optimizing cooling water flows. These optimization measures are designed to prevent production outages due to extreme heat waves.

Short-term risks from investments can result from, for example, technical malfunctions or schedule and budget overruns. We counter these risks with stringent project management and controlling.

In view of current idle capacity, additional opportunities may arise, for example through greater flexibility for maintenance and lower impact from possible production disruptions.

Compared to the previous year, we foresee greater opportunities from investments/production.

Personnel

Due to BASF’s worldwide compensation principles, the development of personnel expenses is partly dependent on the amount of variable compensation, which is linked to the company’s success, among other factors. The correlation between variable compensation and the success of the company has the effect of minimizing risk. Another factor is the development of interest rates for discounting pension obligations. Furthermore, changes to the legal environment of a particular country can influence the development of personnel expenses for the BASF Group. For countries in which BASF is active, we therefore constantly monitor the relevant developments in order to identify risks at an early stage and take suitable measures (for more information, see Operational opportunities and risks and S1 Own Workforce).

Information technology

BASF nutzt eine Vielzahl moderner IT-Systeme. Technologien wie künstliche Intelligenz (KI), Big Data und das Internet of Things (IoT) unterstützen uns dabei, neue Geschäftsmodelle, Unternehmenskonzepte und -strategien zu entwickeln und flexibel auf verändertes Kundenverhalten zu reagieren. Das globale Cyber-Security-Team schützt diese Systeme sowie die darin verarbeiteten Daten und Geschäftsprozesse.

In einer vernetzten und dynamischen Welt steigen die Anforderungen an die IT-Sicherheit kontinuierlich. Angreifer agieren deutlich organisierter, nutzen ausgefeiltere Techniken und verfügen über mehr Ressourcen.

Eine Cyberattacke kann die Anlagenverfügbarkeit, Lieferqualität oder die Richtigkeit unserer Finanzberichterstattung beeinträchtigen. Der unbefugte Zugriff auf sensible Daten, wie zum Beispiel Personal- oder Kundenstammdaten, wettbewerbsrechtlich relevante Informationen oder Forschungsergebnisse, kann zu Haftungsansprüchen gegenüber BASF führen und unsere Wettbewerbsposition gefährden. Zusätzlich drohen finanzielle Verluste sowie Reputations- und Vertrauensverlust bei Kunden und Partnern hinsichtlich der Sicherheit unserer Produkte und Dienstleistungen.

Um derartige Risiken zu minimieren, setzt BASF weltweit einheitliche Verfahren und Systeme ein, um die IT-Verfügbarkeit und -Sicherheit zu gewährleisten. Diese basieren auf dem Standard ISO 27001. Dazu gehören redundant ausgelegte IT-Systeme, Backup-Verfahren, Viren- und Zugangsschutz, Verschlüsselungstechnologien sowie standardisierte IT-Infrastrukturen und -Prozesse. Diese Systeme werden kontinuierlich geprüft, aktualisiert und bei Bedarf angepasst. Darüber hinaus verfügt BASF über eine dedizierte Einheit zur Cyberabwehr mit entsprechender Fachexpertise. Unsere Mitarbeitenden werden regelmäßig zu Informations- und Datenschutzthemen geschult. Das Cybersicherheits-Risikomanagement stützt sich auf klar definierte Organisationsregeln und ein internes Kontrollsystem. Dem Vorstand und dem Aufsichtsrat wird regelmäßig über Cyberrisiken sowie den Umsetzungsstand strategischer Cybersicherheitsmaßnahmen berichtet.

Unsere Schutzkonzepte umfassen die Erkennung von Angriffen, die Reaktion darauf und ihre Abwehr sowie die Minimierung von Auswirkungen. Außerdem pflegen wir starke Partnerschaften mit Sicherheitsbehörden und -verbänden im Bereich Cybersicherheit, zum Beispiel mit der Deutschen Cyber-Sicherheitsorganisation (DCSO) und der Cyber-Security-Sharing-and-Analytics (CSSA)-Plattform in Berlin, Deutschland. Darüber hinaus betreibt BASF ein eigenes Informationssicherheits-Management-System, das nach ISO/IEC 27001:2017 zertifiziert ist.

Für das Geschäftsjahr 2026 wurden Risiken im Bereich Cybersicherheit identifiziert, aber nicht quantifiziert. Quantifizierte Chancen und Risiken ergaben sich im Zusammenhang mit den ERP‑Transformationsprojekten der BASF‑Gruppe.

Compliance/legal

We constantly monitor current and potential legal disputes and proceedings, and regularly report on these to the Board of Executive Directors and the Supervisory Board. In order to assess the risks from current legal disputes and proceedings and any potential need to recognize provisions, we prepare our own analyses and assessments of the circumstances and claims considered. In addition, in individual cases, we consider the results of comparable proceedings and, if needed, independent legal opinions. Risk assessment is particularly based on estimates as to the probability of occurrence and the range of possible claims. These estimates are the result of close cooperation between the relevant operating and service units together with Corporate Legal and Corporate Finance. If sufficient probability of occurrence is identified, we recognize a provision for the proceeding concerned. Should a provision be unnecessary, we continue to assess whether these litigations nevertheless represent a risk to the BASF Group’s EBITDA as part of general risk management (for more information, see Risks from litigation).

We use our internal control system to limit risks from potential infringements of rights or laws. For example, we try to avoid patent and licensing disputes whenever possible through extensive clearance research.

Tax and customs duties

The recognized opportunities and risks only concern taxes, customs duties and other levies that impact the BASF Group’s EBITDA in the short term. These arise when BASF has taken a position that differs from the opinion of a competent administrative authority. If a payment has already been made and could be reclaimed, we present this as an opportunity. Conversely, if a potential payment is outstanding in accordance with the administrative opinion, this is a risk. We primarily evaluate opportunities and risks with regard to their probability of occurrence and, if necessary, set up a provision for the relevant risk. If a provision is not necessary, we take this into account in determining EBITDA-relevant risks for the BASF Group.

Compared with the previous year, we foresee higher customs-related risks.

Exchange rate volatility

Our competitiveness on global markets is influenced by fluctuations in exchange rates. For BASF’s sales, opportunities and risks arise in particular when the U.S. dollar exchange rate fluctuates. On the production side, we counter exchange rate risks by producing in the respective currency zones.

The current assessment of the U.S. dollar suggests greater opportunities and lower risks compared to the previous year.

Financial currency risks result from the translation of receivables, liabilities and other monetary items in accordance with IAS 21 at the closing rate into the functional currency of the respective Group company. If necessary, we hedge these risks using derivative instruments.

Other financial opportunities and risks

Financial risks arise from unplanned cost increases, for example due to higher inflation than assumed. Additional financial risks are related to efficiency measures that may not be effective as planned. Other financial risks, including commodity price risks, particularly relating to raw materials such as naphtha, benzene, natural gas, LPG condensate as well as precious metals and battery metals, are hedged as needed using derivative instruments. There are no significant default risks that have not already been recognized in the financial statements. For more information, see Note 25 to the Consolidated Financial Statements.

In connection with the war in Ukraine, additional financial risks may arise from potential asset impairments or losses.