Risk and opportunity report

PUMA operates in a competitive, fast-paced, and international sport and lifestyle industry, continuously facing both risks and opportunities. The risk strategy is therefore to take business risks in a calculated manner in order to implement the corporate strategy with all its opportunities. For this purpose, effective risk and opportunity management is required so that opportunities can be recognised and capitalised, and risks can be identified and managed at an early stage. We define risks as potential future developments or events that may lead to a negative deviation from targets for the company (see the "Risk Management System" section). Similarly, opportunities are potential future developments or events that may result in a positive deviation from targets.

RISK MANAGEMENT SYSTEM

The risk management system aims to identify and manage material risk at an early stage, including those that could even jeopardise the company's existence, thus supporting the achievement of the company's objectives. In addition, compliance with related laws, regulations and standards must be ensured, as well as transparency in relation to the risk situation from the perspective of partners such as customers, suppliers and investors. Therefore, PUMA has established an appropriate and effective risk management organisation which is able to identify risks at an early stage and manage them in accordance with the corporate strategy and promote risk awareness within the PUMA Group to facilitate risk-based decisions. As part of the organisation, risks are looked at Group-wide, unless explicitly stated to the contrary. As in the previous year, PUMA's risk management system is based on a comprehensive, interactive, and management-oriented approach to risks that is integrated into the company's organisation and is based on the globally recognised COSO standard (Committee of Sponsoring Organizations of the Treadway Commission). Opportunity management, however, is not part of the risk management system and is the responsibility of operational management teams in the respective regions, markets, and departments (see the "Opportunities" section).

The Management Board of PUMA SE bears overall responsibility for the risk management system in accordance with Section 91(3) AktG. The Management Board regularly updates the Audit Committee of the Supervisory Board of PUMA SE. In addition, pursuant to Section 107(4) AktG., the Audit Committee has a direct right to information from the operational management departments. The Risk Management Committee, which consists of the PUMA SE Management Board and selected managers, is responsible for the design, review, and adaptation of the risk management system. For the operational coordination of the risk management process and support of the risk officers, the risk management function of the Group Internal Audit, Risk Management & Internal Control department has been assigned to prepare the regular risk reporting to the Risk Management Committee. The responsibilities, tasks and processes of the risk management system are defined in PUMA’s enterprise risk guidelines. The structure and design of the risk management system are as follows:

The risk owners are primarily the managers of the functional areas and the managing directors of subsidiaries. Risks are identified company-wide by performing a bottom-up analysis within the risk owner's area of responsibility. These risks are regularly reported to the risk management function and/or the local monitoring bodies in structured interviews that take place every six months or during the year using established internal reporting channels. As a part of the PUMA’s risk culture, general information for risk management as well as training materials are made available to all employees.

The risks are evaluated and assessed based on their probability of occurrence and potential damage using quantitative criteria with the help of a systematic methodology. The quantitative criteria are represented in the form of risk classification ranges on a four-level scale: Low, Medium, Significant and High. While the risk assessment of the probability of occurrence is measured as a percentage rate, the extent of damage is based on the planned operating result for the upcoming financial year. PUMA follows a net risk approach, addressing the risks that remain after existing control measures have been implemented. The resulting risk assessments are presented as an aggregated risk group ("overall risk situation"). Thus, for the purpose of assessing materiality, the quantified risks arising from the extent of damage and the probability of occurrence are combined and classified in a comprehensive risk matrix with regard to their significance level (‘low’, ‘moderate’, ‘material’, ‘critical’) for internal monitoring and to assess their viability (see the following risk matrix chart).

For example, a risk may be classified as critical, in the case that its assessment reflects a combination of highest bandwidth for extent of damage (“High > € 50 million”) and probability (“High > 50%”). The overview of risk groups is summarised in tabular form in the following table ‘Overview of risk groups’ in the order of their relative importance and their change during the year.

Regular risk identification and assessment is carried out by the risk management function every six months with all major functional areas. The risks recorded and assessed are also reviewed with a top-down approach by the Risk Management Committee. This ensures that adequate consideration is given to interdependencies and the overall risk situation.

The risk owners are responsible for the operational management of identified risks. Risks can be managed by avoiding, reducing, diversifying, or transferring them to achieve the targeted and acceptable residual risk. Within the reporting process, material risks or those which could even jeopardise the company’s existence are coordinated with and managed by the Risk Management Committee or the Management Board, considering the risk-bearing capacity, which is also based on the planned operating result.

The methodology and structure of the risk management system are continuously monitored in terms of their appropriateness and effectiveness and adapted or improved when required. This is carried out on the one hand by the Internal Audit department, as an independent audit body within the PUMA Group, and on the other hand through the utilization of the results of the auditor of PUMA SE, which assesses the early risk identification system annually for its fundamental suitability to be able to identify risks that endanger the company’s existence at an early stage.

RISKS

The following explanations of risk groups are presented based on their relative importance for the financial year 2024.

MACROECONOMIC DEVELOPMENTS

As an internationally operating enterprise, PUMA is exposed to challenges and uncertainties that affect the global economy. These risks may impact our sales and sourcing markets. For example, macroeconomic risks because of economic recessions, changes in interest rates, or inflation and cost pressures, might influence consumer behavior, production costs, revenues, and profit margins. Additionally, global events like political changes, social developments, geopolitical tensions, natural disasters and diseases can disrupt supply chain activities or affect consumer sentiment, are also reflected in macroeconomic conditions.

In 2024, macroeconomic risks are significantly influenced by global and regional economic, political and geopolitical instability. The geopolitical environment including the Middle East conflict, the ongoing conflicts between Russia and Ukraine, and the Red Sea Crisis remains challenging. The macroeconomic environment and volatile demand in key markets, particularly in North America and Europe, also continue to pose difficulties. Recession risks continue to weigh on consumer sentiment, which has not improved significantly. Additionally, the market environment in China remains uncertain, and competition with both local and global brands remain high.

Overall, we manage these challenges by maintaining close alignment and communication with regions and key markets to monitor and address critical developments affecting PUMA’s business environment (e.g., price increases, supply chain interruptions, geopolitical tensions). We also develop alternative scenarios to analyse the possible occurrence of events. PUMA continues to make progress on its strategic initiatives of brand elevation, product excellence and distribution quality with special focus on the U.S. and China and focused on strong sell-through and the best possible service to its retail partners, brand ambassadors and consumers. Moreover, the Management Board is regularly updated about country and macroeconomic developments and defines action plans to quickly adapt to changing economic conditions.

BUSINESS PARTNERS

As a global enterprise, managing sourcing and supply chain risks is crucial for PUMA. Our products are predominantly produced in Asian countries, including China, Vietnam, Cambodia, Bangladesh, Indonesia, and India. Production in these countries presents significant risks, including changes in sourcing, wage, and logistic costs, supply bottlenecks for raw materials or components, quality issues, and potential overdependence on individual suppliers. In 2024, global sourcing markets were impacted by ongoing geopolitical tensions, which affected supply chains and created risks for business operations. In addition, increasing state protectionism, trade conflicts, higher tariffs and stricter regulatory requirements - particularly in economic relations between America, Europe and Asia as a result of the recent US election - will have a significant impact on global trade and economic growth. These developments could have a negative impact on PUMA's business operations and financial condition.

To mitigate risks related to business partners, we have implemented a robust framework for sourcing and supply chain processes. Our sourcing portfolio is regularly reviewed and adjusted to avoid dependence on individual suppliers and sourcing markets. Long-term master framework agreements are established to secure future production capacities. Regular communication with PUMA entities allows us to anticipate price increases and strengthen our forecasting activities. A quality control process and the direct and partnership-like collaboration with suppliers ensure the quality and availability of our products. Additionally, we continuously analyse political, economic, and legal conditions and have enhanced our cooperation with suppliers and logistics partners to react to supply chain changes early and strengthen the supply chain. Collaboration with warehouse and logistics service providers is secured through selection processes, consistent contractual terms, and permanent monitoring of relevant indicators.

CURRENCY RISKS

PUMA, as an internationally operating corporation, is exposed to transactional foreign currency risks. These currency risks arise to the extent that the exchange rates of currencies in which purchasing and sales transactions, as well as credit transactions and receivables, are conducted fluctuate against the functional currency of the PUMA Group – the euro.

PUMA's largest procurement market is the Asian market, where payment flows are primarily conducted in US dollars (USD), while the PUMA Group's revenues are largely invoiced in other currencies. PUMA manages currency risk in accordance with an internal policy. In line with the Group policy, significant risks are hedged up to a coverage ratio of 95% of the estimated foreign currency risks arising from expected purchasing and sales transactions over the next twelve to fifteen months. To hedge foreign currency risk, foreign exchange forward contracts and currency options are typically used, with a maturity of approximately twelve months from the balance sheet date. For significant risks subject to high hedging costs, high coverage ratios can only be achieved over shorter time periods.

PUMA exclusively enters into standard foreign exchange forward contracts and currency options with renowned international financial institutions to hedge already concluded or anticipated contracts. As of the end of 2024, the net exposure for the planning period of 2025 was adequately hedged against currency fluctuations, where possible.

Furthermore, foreign currency risks may arise from intra-group loans issued for financing purposes. To hedge currency risks associated with converting intra-group loans denominated in foreign currencies into the functional currencies of the Group companies (EUR), currency swaps and foreign exchange forward contracts are used.

In addition, as an international corporation with its own presence in numerous countries, PUMA is also exposed to translation risks. These arise during consolidation when the financial statements of foreign subsidiaries that do not report in euros are converted into the functional currency of the PUMA Group, the euro.

In high-interest and high-inflation countries, both transaction and translation risks can arise to a significant extent. PUMA does not hedge these risks, as the cost of hedging in high-interest countries—if hedging is even possible—often significantly exceeds the benefits of risk mitigation. Instead, the negative effects of currency fluctuations and inflation are primarily offset through price adjustments of products in the respective market.

To represent market risks, IFRS 7 requires sensitivity analyses that show the effects of hypothetical changes in relevant risk variables on earnings and equity. The periodic effects are determined by applying hypothetical changes in risk variables to the portfolio of financial instruments as of the reporting date. It is assumed that the portfolio as of the reporting date is representative of the entire year.

Currency risks in the sense of IFRS 7 arise from financial instruments that are denominated in a currency other than the functional currency and are of a monetary nature. Exchange rate differences resulting from the conversion of individual financial statements into the group currency are not considered. The relevant risk variables are generally all non-functional currencies in which the group uses financial instruments.

The currency sensitivity analysis is based on the net balance sheet risk denominated in foreign currencies. This also includes intra-group monetary assets and liabilities. In addition, outstanding currency derivatives are revalued as part of the sensitivity analysis. It is assumed that all other influencing factors, including interest rates and commodity prices, remain constant. Furthermore, the effects of projected operational cash flows are disregarded.

The foreign exchange forward contracts used to hedge currency-related payment fluctuations are included in an effective cash flow hedge relationship according to IFRS 9. Exchange rate changes of the currencies underlying these transactions impact the hedging reserve in equity and the fair value of these hedging transactions.

PRODUCT AND MARKET ENVIRONMENT

The sport and lifestyle industry is characterised by intense competition, constant innovation, frequent trend changes, and evolving consumer preferences. PUMA faces the challenge of continuously innovating and differentiating its products to capture consumer interest and gain an edge over its competitors. Product and market environment risks can arise from unanticipated, late, or insufficient responses to consumer demand. Constant changes in sport and lifestyle trends and long product lifecycles bear the risk of creating products that may not fully resonate with consumers, launching them at the wrong time, with the wrong marketing support or placing them in the wrong distribution channels. As a result, these risks could lead to a loss in market share, sales shortfalls, and diminished brand attractiveness. PUMA’s brand image is significantly influenced by our media presence and coverage. For example, reports about law infringements, non-compliance with internal/external requirements or workplace standards, negative coverage associated to inferior product quality or recalls, and social media exposure can severely damage the brand image, ultimately resulting in lost sales and profit.

To mitigate these risks, we conduct systematic market research to identify relevant consumer trends as early as possible. Through targeted investments in product design and development, we ensure that our product range appeals to consumers around the world and aligns with our brand positioning, further building our distinctive brand DNA. PUMA's brand image is also strengthened through collaborations with celebrity brand ambassadors who embody PUMA's brand values and have great potential to influence PUMA's target audience. These ambassadors are carefully selected according to the requirements and needs of the brand and the company. In addition, careful press, social media and public relations work and monitoring of the media and social media environment is carried out to counter potential risks.

PROJECTS

PUMA’s strategic program portfolio includes important and critical projects to ensure that the flow of goods and information is sufficiently supported by modern warehouse, logistics and IT infrastructure. These include but are not limited to the implementation of IT systems to enhance operations, such as core value systems, e-commerce platforms, warehouses and supply chain. Risk associated with projects include ineffective change management, lack of resources, high costs, budget overruns, extended time frames, non-acceptance of users due to weak communication, increased vulnerability to potential data breaches and disruption to business processes. In particular, investments in warehouse-, logistics-, and IT-infrastructure are associated with risks, such as changes in market conditions or technological advancements that require adjustments.

In order to effectively manage project-related risks, e.g. in the area of warehouse-, logistics- and IT- infrastructure, PUMA has established Group project teams and regional project teams as well as guidelines to manage the introduction of new and existing projects that have a significant impact on the core value chain. In addition, as part of project management, a steering committee ensures that strategic projects and programs are efficiently managed, monitored and supported. This approach enables project risks to be identified at an early stage and measures to be taken in good time. Through clear prioritization and close coordination with stakeholders, project control is maintained beyond implementation to ensure success and alignment with business needs, including the continuous re-evaluation of projects and the resulting lower prospects of success or possible reversal.

LEGAL

As an internationally operating group, PUMA is exposed to various legal risks. These risks could arise from Intellectual Property (IP) infringements, such as the unauthorized use of trademarks, patents or copyright potentially resulting in legal disputes, brand damage or loss of exclusivity rights. Contractual risks, including the possibility of third parties asserting claims and litigations for trademark infringements are also considered. Additionally, counterfeit products are often of inferior quality and may not meet safety standards which can undermine a PUMA’s brand reputation, reduce consumer trust and lead to legal disputes.

Continuous monitoring of contractual obligations and the integration of internal and external legal experts in contractual matters are essential to minimize legal risks. The legal team is responsible for protecting our intellectual property in order to act against brand piracy. This not only ensures a robust global portfolio of property rights, such as trademarks, designs and patents, but also involves close collaboration with customs, police and other authorities and provides input to legislators regarding the implementation of effective measures to protect intellectual property.

INFORMATION TECHNOLOGY

The ongoing digitalization of business environments brings new challenges to PUMA in the field of information technology which, – in case of incidents - may have an impact on our operations, data security and privacy, as well as overall performance. Key business procedures and processes, such as supply chain management, e-commerce, and financial reporting depend on digital services, infrastructure, and their unimpaired availability. Interruptions in service availability can disrupt essential processes and cause operational problems. Increasing sophistication of cyber-attacks, including the use of AI-based models, enables exposure to attacks using phishing, ransomware and malware that could compromise sensitive data and disrupt operations. Moreover, information security is of outmost importance for PUMA; the risk of a data breach might lead to financial loss, brand damage, legal claims, and loss of customer trust.

To mitigate these risks, we continuously implement technical and organizational measures. Key business procedures, processes and infrastructure related to information technology and security are established based on best-practice frameworks, regularly updated and controlled. These processes are subject to internal and external audits to ensure their reliability and the appropriateness of control mechanisms. Appropriate procedures and guidelines related to IT-incident response are in place and updated regularly. In addition, training and information campaigns are conducted regularly to increase awareness and knowledge on information security-related issues.

DEFAULT RISKS

Due to its business activities, PUMA is exposed to default risk on trade receivables. These risks consider delayed payments and losses of accounts receivables (e.g., default of a customer) as well as default risks from counterparty's other contractual financial obligations (e.g., bank deposits, derivative financial instruments). This could lead to bad debt expenses and reduced liquidity and could have a negative impact on cash flow and profitability, as trade receivables are one of the most significant financial assets. In 2024, the risk of payment defaults increased as the amount of outstanding payments from business partners increased in line with the sales trend in various markets.

The risk of default is countered by continuous monitoring of outstanding receivables and payment targets as well as sufficient value adjustments. The default risk is limited, if possible, by credit insurance. The maximum default risk is reflected by the carrying amounts of the financial assets recognized in the balance sheet. In addition, default risks also arise to a lesser extent from other contractual financial obligations of the counterparty, such as bank balances and derivative financial instruments.

MONITORING OF WORKING CONDITIONS

An important aspect of corporate responsibility is maintaining and monitoring good working conditions compliance with human rights in PUMA’s own operations and throughout the supply chain to ensure that employee’s rights and well-being are protected. This risk considers the potential event of human rights violation, social non-compliance or poor factory HR practices (such as child labour, excessive overtime, forced labour, unsafe work environment, low income, unsecured employment lack of workers and lack of training and skill development) in PUMA’s supply chain.

To mitigate these risks, PUMA has implemented clear policies that are aligned with all relevant legislation on sustainability like the German Supply Chain Due Diligence Act, United Nations’ (UN) Declaration of Human Rights, the UN Guiding Principles (UNGPs) on Business and Human Rights, the International Labor Organization’s Core Labor Conventions, and the ten principles of the UN Global Compact (UNGC). Regular audits and human rights/environmental risk assessments are conducted at the corporate and the supply chain level to evaluate compliance with applicable standards. Stakeholder dialogue with NGOs and partnerships with organizations (e.g., Fair Labor Association, German Partnership for Sustainable Textiles) enable transparent communication channels to address concerns and share best practices regarding human rights and environmental standards.

TAX

As a global company PUMA is exposed to a complex tax environment with main challenges arising from cross-border transactions involving intercompany transfer of goods, services, and intellectual property. To minimize tax exposure, it is essential to optimize tax planning activities and ensure compliance with local and international laws and reporting requirements. In addition to compliance with national tax regulations applicable to individual group companies, there are increasing risks related to intra-group transfer pricing requirements. These must be applied for various internal business transactions in accordance with the arm's length principle between related parties. Different countries have implemented laws and guidelines for international taxes in alignment with the Organization for Economic Cooperation and Development (OECD) recommendations to standardize transfer pricing requirements.

In order to manage tax-related risks effectively, PUMA has established a solid tax governance framework. This includes an adequate tax organization with internal and external tax experts to comply with the relevant tax regulations and to react to changes in the constantly evolving tax environment. For the group-internal transfer pricing, corresponding documentation and policies are in place and aligned with international and national requirements and standards. Guidelines and regulations for determining transfer pricing for intra-group transactions apply to foreign subsidiaries. They comply with the applicable internal procedures and are binding for employees acting on behalf of the Group. By means of internal tax reporting, external and internal tax experts can control and monitor tax developments at PUMA on an ongoing basis. Training and awareness activities are performed on a regular basis to ensure relevant stakeholders are informed about current tax developments and acquire further expertise for tax treatment activities. Both the Management Board, and the Supervisory Board, are regularly informed about ongoing tax developments at PUMA to identify and avoid tax-related risks as early as possible.

COMPLIANCE

As an international group, PUMA is exposed to compliance risks resulting from the potential non-adherence to corporate governance rules, legal and regulatory requirements, or industry standards. These risks include fraud, conflict of interest, money laundering, corruption, violations of human rights, environmental protection and antitrust law, as well as deliberate misrepresentations in financial reporting which may lead to significant penalties, legal consequences, reputational damage and disruption to business operations.

PUMA has implemented various tools to manage such risks. This includes a functioning compliance management system, an internal control system, group controlling and internal audit departments to prevent, detect and sanction compliance-related topics at an early stage. Through the compliance management system, clear roles and responsibilities are assigned to group and local compliance functions. To ensure PUMA employees comply with PUMA‘s values, ongoing trainings, communication and awareness campaigns for policies and procedures are carried out. PUMA employees also have access to PUMA’s electronic whistleblowing system (SpeakUP) for reporting illegal or unethical behavior, and violation of laws and PUMA policies.

DISTRIBUTION STRUCTURE

PUMA relies on diversified distribution channels, including the Wholesale business with our retail partners and the Direct-to-Consumer (DTC) business with our PUMA-owned and operated retail stores and e-commerce platforms. This strategy enables PUMA to reduce its dependency on individual distribution channels and/or retail partners.

The wholesale business accounts for the largest share of total revenue and is characterized by strong and long-term partnerships. The DTC business has a complementary role and is intended to ensure a better and more comprehensive presentation of PUMA products in a controlled brand environment, direct interaction with our end consumers and higher gross profit margins.

In the wholesale business, the competitive pressure from other sports brands, poses risks such as intensified market share competition, price pressure and reduced profit margins. Consumer purchase behavior is also changing, focusing more on e-commerce and a combination of stationary and digital trade. This requires continuous adjustment of the distribution structure. Distribution through our retail stores and e-commerce platforms is, however, also associated with various risks including required investments in expansion and infrastructure, store setup and refurbishment, higher fixed costs, and long-term lease obligations. These factors can have an adverse impact on profitability in the event of a business decline.

To mitigate risks, we conduct continuous monitoring of distribution channels and regular reporting by dedicated functions. We maintain strong collaborations with all our retail partners aligned with our wholesale-focused strategy. Our reporting and controlling system allow us to detect negative trends early on, and to take the countermeasures required to manage individual stores and overall to monitor the evolution of the distribution landscape. In the retail business, detailed location and profitability analyses are conducted before investment decisions to develop new store formats and concepts. In e-commerce, global activities are being standardized, and investments are being made in IT infrastructure to further enhance the shopping experience for our consumers. One example is our latest initiatives in China, where tailored digital services are specifically designed to meet local consumer needs. This enables more effective fulfillment of the individual and diverse demands of Chinese customers, fostering sustainable growth in a dynamic market.

SUSTAINABILITY

Sustainability topics are highly important for PUMA, extending from corporate strategies and workforce considerations to sourcing and the entire value chain. The climate crisis, increasing pressure and dependencies on natural resources, changing consumer and customer expectations, and an evolving regulatory landscape concerning environmental and social aspects have led to a strong commitment to sustainability in our business practices. This includes the selection of certified/recycled materials, as well as the broader management of environmental and social topics, such as compliance with environmental management standards, responsible sourcing, reduction of greenhouse gas emissions, strategies for renewable energy use, chemical management and upholding human rights. It also includes addressing workforce topics like talent management, diversity and inclusion, which are assessed comprehensively in other risk groups mentioned in this report.

All potential impacts, risks and opportunities are assessed with a comprehensive process at PUMA resulting in a detailed materiality assessment and focus on key areas. The risk of not implementing an effective sustainability strategy to our products, sourcing or corporate practices could lead to serious brand damage, loss of customer loyalty, supply chain disruptions, increased costs, and non-compliance with sustainability regulations.

PUMA’s sustainability strategy, known as FOREVER.BETTER. reflects our commitment to managing material sustainability-related impacts, risks and opportunities. This strategy integrates sustainability targets into core business functions, ensuring that sustainability is a key priority across all levels of the organisation. There are measurable targets and key performance indicators which are regularly monitored and reported to Supervisory Board and Management Board, and stakeholders. Our strategy focuses on ten key areas for improving sustainability performance: Human Rights, Climate Action, Circularity, Products, Water and Air, Biodiversity, Plastics and the Oceans, Chemicals, Health and Safety, and Fair Income. These areas are aligned with the UN Sustainable Development Goals (SDGs). In 2024, after consulting with stakeholders, PUMA developed new Vision 2030 sustainability targets, which build on these key areas and sharpen the focus under three main themes: Human Rights, Climate Action, and Circularity. Additionally, risk assessments and audits are conducted to ensure both PUMA entities and suppliers adhere to sustainability standards. PUMA also engages stakeholders through different initiatives like formal Stakeholder Dialogue meetings bringing all relevant external and internal parties in one room, or "Voices of a RE:GENERATION" allowing to discuss sustainability topics with generation Z representatives, industry peers, experts and activists.

As emerging risks, we have identified Climate Change Adaptation as well as PUMA’s Impacts on Biodiversity.

The PUMA sustainability statement is part of the combined management report. Additional sustainability-related information can be found in the preceding chapter, "Sustainability Statement."

PERSONNEL DEPARTMENT

The creative potential, commitment, and performance of PUMA employees are crucial for achieving our strategic and financial goals. Personnel-related risks include workforce management, talent management, employee engagement, and compliance with employment laws. Any staffing shortfall may lead to inadequate task performance and negatively impact operational efficiency. Moreover, strong global competition for highly qualified personnel persists. Therefore, the loss of key personnel and challenges in identifying, attracting, and retaining key talent could result in a loss of know-how and decreased business performance. Non-compliance with health and safety laws and regulations could result in accidents, penalties, employee dissatisfaction, business interruptions, and reputational damage at the Group level.

Our human resources strategy encourages independent thinking and action, which are key in maintaining an open corporate culture with flat hierarchies on a long-term and sustainable basis. To achieve this goal, we have implemented a control process to identify and assess human-resource risks. PUMA focuses on talent management by identifying key positions and talent, ensuring this talent is optimally trained and positioned, and planning for succession. We have also instituted additional national and global regulations and guidelines to ensure compliance with legal provisions and safeguard employee health, wellbeing and safety. Moreover, employee surveys are conducted to obtain feedback and measure engagement (e.g., “Great Place to Work”, “Diversity Leader”). In 2024, PUMA received several awards recognizing our efforts to create a diverse, inclusive, and equal workforce (e.g., “Top Employer”). We will continue to make targeted investments in the human resource needs of functions or regions to meet the future requirements of our corporate strategy.

LIQUIDITY AND INTEREST RATE RISKS

PUMA continually analyses short-term capital requirements by rolling cash flow planning at the level of the individual companies in coordination with the central Treasury department. In order to ensure the company's solvency, financial flexibility and a strategic liquidity buffer, PUMA maintains a liquidity reserve in the form of cash and confirmed credit facilities. In this respect, as of December 31, 2024, the PUMA Group had unused credit lines totaling € 1.360,2 million.

Medium and long-term funding requirements that cannot be directly covered by net cash from operating activities are financed by taking out medium and long-term loans. For this purpose, various promissory note loans were issued in several tranches with fixed and variable coupons and different remaining terms. The utilized promissory note loans amount to a total of € 426,4 million as of December 31, 2024, and have a remaining term of between/up to one and four years.

Changes in market interest rates around the world have an impact on future interest payments for variable interest liabilities. As PUMA only has a limited amount of variable interest-bearing liabilities, interest rate hedging instruments are used to a limited extent.

RISK OVERVIEW TABLE

The following table summarizes the risk groups described above based on their relative importance (significance level) and any changes during the year:

OPPORTUNITIES

Opportunities should be recognised, assessed and, where possible, exploited by PUMA at an early stage. Opportunity management is a company-wide responsibility that starts at the strategic level and extends through operational management to every single person in the company. As part of the annual strategic planning, budget and medium-term process, the opportunities identified are integrated into PUMA's overall planning approach. PUMA has identified and defined several key opportunity categories for the planning period and beyond.

PUMA's corporate strategy aims to strengthen our brand. With this overarching framework, we particularly want to create an even stronger foundation for growth, above-average success in the market, the acquisition of additional market share and sustainable profitability.

To strengthen the brand, we have defined three pillars that open up important opportunities: Establishing a distinctive brand DNA, strengthening our credibility and authenticity through a strong performance business and reinforcing our relevance in the Sportstyle prime segment.

PUMA will continue to invest in the brand and sees significant opportunities to increase market share in all key markets. To further increase brand equity, we relaunched our “See The Game Like We Do” campaign in April 2024 for the first time in ten years. The improvement in brand awareness in key markets and the positive KPI development following the campaign support the increase in popularity of the brand and the acquisition of additional market share.

In the second pillar, perception as an authentic and credible sports brand is further promoted through innovation, strong performances by our brand ambassadors and a strong presence at our sales partners' points of sale. In recent years, we have made great progress in our key sports categories and significantly strengthened our market position in soccer, running, fitness, basketball, golf and motorsports. In the running segment in particular, which we only re-entered a few years ago, we continue to see considerable potential for increasing our market share. Our product offering is continuously optimized and further developed across all categories, with a particular focus on innovation, technology (e.g. NITRO) and franchise management. In 2025, several international sporting events will provide an important platform to underline our performance and further strengthen our brand presence. We will build on the visibility and brand popularity we achieved at the 2024 Olympic Games.

The third pillar of our strategy focuses on increasing relevance in the Sportstyle Prime business. The prime segment and the success of our franchises offer PUMA a significant opportunity to increase our market share in a very large and relevant market segment. We will continue to focus on trends in the low profile segment, launch new products and expand distribution with key partners.

In terms of distribution, PUMA will continue to focus on the wholesale channel. Strong partnerships with our wholesale customers offer opportunities for future market share gains and business growth. However, we also see significant opportunities in our Direct-to-Consumer (DTC) business with a particular focus on PUMA's e-commerce channels. In line with our overall brand development strategy, we will continue to improve the consumer experience in all e-commerce channels and invest in the underlying technology infrastructure. New store formats and improvements to the overall shopping experience in our own retail stores can and should also lead to additional business opportunities. In the distribution area, ensuring delivery through new, state-of-the-art multi-channel distribution centres in key markets continues to support business development.

In the area of information technology, we identify opportunities both in the strategic realignment of our global organization and in the next phase of our Enterprise Business Planning (EBP) transformation, which will provide best practices and governance structures in all regions and thus contribute to a strengthened global structure. Furthermore, advances in generative artificial intelligence are driving new digital use cases that will impact almost all areas of work and offer significant potential for innovation and increased efficiency. In addition, modern technology platforms with a flexible, modular architecture will increase the speed at which new functions are implemented and ensure an agile and scalable IT landscape that can quickly adapt to new requirements. We also see the integration of digital teams with comprehensive end-to-end responsibility as an opportunity to implement digital projects more efficiently and successfully. In summary, by creating a global Digital & Technology organization, we aim to support PUMA's growth and drive digital transformation to become faster and more efficient. Through innovation and close collaboration with our business partners, we will create seamless digital experiences for our employees and customers. At the same time, we have a responsibility to protect PUMA's data and assets through the use of cutting-edge technologies and targeted training for our employees.

At PUMA, we are committed to people and our planet in all areas of our business. We take responsibility and are constantly finding new ways to become even more sustainable. As sustainability becomes increasingly more relevant to our end consumers and external stakeholders, the importance of sustainability-related communication, recycled and certified products and sustainability disclosures is growing. PUMA's strategic approach to sustainability is focused on maximizing impact within the company itself, within the supply chain and with the end customer. Numerous initiatives are currently underway. In 2024, for example, PUMA manufactured eight out of ten products in accordance with its sustainability index, thus reaching another milestone. The sustainable products are made from materials that are classified as preferred by Textile Exchange or come from certified sources. PUMA has launched the “Voices of a RE:GENERATION” initiative, which aims to continuously communicate with activists and environmentalists of today's generation and provide feedback to our leadership on how PUMA can further strengthen its sustainability initiatives and communicate its sustainability efforts to young audiences. Through these initiatives, we can further develop sustainability at PUMA, capitalize on resulting business opportunities, increase productivity, drive innovation, further strengthen the brand's reputation and ensure compliance with regulatory standards.

To achieve the goals of our corporate strategy, PUMA complements it with “nextlevel”, a comprehensive efficiency program targeting cost optimization and operational improvement, which puts an increased focus on translating top-line growth into increased profitability growth. The “nextlevel” programme aims to achieve an EBIT margin of 8.5% by 2027 by optimizing direct and indirect costs. In combination with our brand elevation strategy, we are committed to achieve a 10% EBIT margin in the long term. PUMA will continue to strategically invest in the brand, innovative products, wholesale and retail, productive warehouses, advanced technologies and our people, which are the foundation for sustainable growth.

OVERALL ASSESSMENT OF THE RISK AND OPPORTUNITY SITUATION

The assessment of the overall risk and opportunity situation of the Group and PUMA SE is the result of a consolidated view of the risk and opportunity categories described above for the financial year 2024. In line with the description in our economic report, our assessment of PUMA's overall risk situation this year is significantly influenced by geopolitical tensions, trade conflicts, a volatile environment with persistent currency headwinds and subdued consumer sentiment in key markets. Even though individual risks have increased, we see the overall risk situation as unchanged compared to the previous year. The Management Board is currently not aware of any material risks that, either individually, on an aggregated basis or in combination with other risks, could jeopardize the continued existence of the Group and PUMA SE.

However, we cannot exclude the possibility that in the future influencing factors, of which we are currently unaware or which we currently do not consider to be material, could have a negative impact on the continued existence of the Group or PUMA SE or individual consolidated companies. Also due to the extremely solid balance sheet and the positive business outlook, the Management Board does not see any significant threat to the continued existence of the PUMA Group and PUMA SE.

MAIN FEATURES OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

PUMA's internal control and risk management systems are designed to manage risks in a targeted manner instead of eliminating them completely. Although they do not guarantee absolute security, they help to support the achievement of our corporate goals and to identify, assess and limit significant risks at an early stage. These include the protection of company assets, reliable financial reporting and compliance with relevant legal and regulatory requirements. The internal control and risk management system is designed as an ongoing process that aims to identify potential risks to business objectives at an early stage, prioritize them according to their relevance and manage them effectively through targeted measures. This includes the definition of specific control objectives, the continuous monitoring of risks and countermeasures and the evaluation of the effectiveness and appropriateness of the controls implemented to reduce risk.

The core elements on which our internal control and risk management system is based include:

• Risk management system (RMS): Our risk management system provides a standardized method for identifying and assessing significant corporate risks, including their impact and probability of occurrence. It defines clear responsibilities and processes for risk management, which is integrated into daily business management. The system is based on the COSO standard. A description of our RMS can be found in the previous chapter “Risk management system”.
• Internal Control System (ICS): PUMA's Internal Control System is a structured, consistent and ongoing process that is applied throughout the company and is based on the COSO principles and guidelines. The aim is to continuously optimize the internal control system by identifying control weaknesses and assessing specific risks in the areas of strategy, operations, finance, sustainability and compliance. The established process ensures that recommendations for action are formulated precisely and implemented promptly by the process owners. A description of our ICS can be found in the “Internal control system” section below.
• Compliance Management System (CMS): PUMA has implemented a Compliance Management System to systematically prevent, detect and remedy violations of the law. It is based on risk assessments, guidelines, training and a strong compliance culture. The PUMA Code of Ethics is a central component and defines binding values and standards of conduct for all employees. The whistleblowing platform “SpeakUp” can be used to anonymously report violations worldwide, whereby PUMA guarantees strict protection against reprisals. Complaints are investigated confidentially, and appropriate action is taken immediately in the event of confirmed violations.
• Internal Audit System (IAS): Internal Audit supports the improvement of management and the monitoring of processes within the PUMA Group. This is ensured through the systematic and consistent performance of independent audits, objective consulting services and targeted initiatives. In December 2024, PUMA's internal audit was audited by an independent third party to ensure compliance with the requirements of Domain III of the DIIR (German Institute of Internal Auditors) and the standards of the International Professional Practices Framework (IPPF) of the Institute of Internal Auditors (IIA). This independent audit confirmed that the internal audit creates added value for the Group, improves its operational processes and contributes to the achievement of the Group's objectives through a systematic, disciplined approach to assessing and optimizing the effectiveness and efficiency of risk management and internal control systems.

The Management Board receives ongoing support in assessing the effectiveness and appropriateness of the internal control and risk management system through regular reports from the Group Internal Audit, Risk Management & Internal Control and Group Compliance departments. Identified weaknesses are analyzed and remedied through targeted countermeasures. In addition, the managers of the respective departments are responsible for ensuring compliance with relevant control mechanisms and guidelines and for implementing and continuously monitoring an effective internal control and risk management system within their area of responsibility.

INTERNAL CONTROL SYSTEM

PUMA's internal control system applies to all employees throughout the Group. It includes the principles, procedures and measures defined by the management of the PUMA Group. All key business processes that support the organizational implementation of management decisions must be taken into account. In addition, processes and controls in connection with financial and sustainability reporting are integrated in accordance with PUMA's internal control framework.

The methodology of the PUMA Group's internal control system is based on the COSO framework. This framework describes internal management and monitoring elements for central processes within the company, including sustainability reporting. It supports the goal of proper reporting, improving the efficiency and effectiveness of processes and compliance with legal requirements.

The PUMA control framework is applicable for all one hundred percent subsidiaries. The main goal here is to manage significant risks through appropriate control activities. The objective is to continuously improve the internal control system and to identify specific risks and potential improvements in the control environment at process level in order to define appropriate recommendations for action and to systematically track their timely implementation. Independent monitoring bodies such as the Supervisory Board and the Audit Committee help to ensure that the control environment remains up-to-date. The Management Board of PUMA SE bears overall responsibility for the internal control system. The Management Board regularly updates the Audit Committee of the Supervisory Board of PUMA SE. The internal control function of the Group Internal Audit, Risk Management & Internal Control Department has been tasked with preparing regular reports for the Management Board in order to help coordinate the internal control system from an operational perspective. The responsibilities, tasks and processes of the internal control system are defined in guidelines.

With regard to the PUMA control framework, the following five core components must be kept in mind: control environment, risk assessment, control activities, information and communication, and monitoring activities.

The internal control system is based on the control environment established within the PUMA Group, in that it lays out principles for employee and management behavior within the company. The standards practiced are underpinned by internally formalized procedures and by clear guidelines on giving instructions and authorizations. Together with external regulations, these internal standards form a control environment that applies to all employees of the PUMA Group, supported by the relevant management and the process manager in the entities.

As described in the previous section headed "Risk Management," the PUMA Group is also subject to a large number of risks that may potentially impact on company goals. Risk identification and assessment is carried out every six months in order to present material risks at Group level. In this respect, the internal control system is designed to ensure that all identified risks are compensated for by appropriate control measures. In addition, the internal control system's risk assessment also includes a large number of more detailed risks in day-to-day operations – for example, operational activities in accordance with compliance regulations.

Control activities serve to counteract the identified business risks. In order to ensure that the control framework is continuously up-to-date and monitor its application in business processes, an annual "Internal Control Self-Assessment" (ICSA) is completed by the key business units of the PUMA Group. The internal control function ensures that the key business units - at parent and subsidiary company level - are included in the ICSA. The managers of these business units evaluate the specified control objectives of the PUMA Group in relation to their business area. When doing so, the existing control framework is assessed based on internal and external guidelines and best-practice standards. Based on the responses, a level of implementation of the controls is determined, which undergoes independent verification by the Internal Control function and is then communicated to the Management Board using established reporting channels. The results of the ICSA are also reported to the Audit Committee and the statutory auditors and are used by the internal audit function of the Group Internal Audit, Risk Management & Internal Control Department in risk-oriented audit planning.

The purpose of informing and communicating potential business risks and control activities is to help make sound business decisions, with the information required to do so being accessible within an appropriate and timely framework. Established communication channels are continuously used in the PUMA Group to achieve this. The internal control function coordinates awareness training and regular coordination meetings in order to continuously guarantee, and also strengthen, its cooperation with the Management Board and other managers of business units.

The use of a standardized software system as the basis for monitoring activities is intended to ensure the systematic and uniform implementation of ICSA across the entire company. The internal control function analyses the results of the ICSA and derives recommended actions, which are coordinated with the managers of the business units and the implementation status of which is reviewed and monitored continuously.

MAIN FEATURES OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM AS IT RELATES TO THE GROUP'S ACCOUNTING PROCESS

The Management Board of PUMA SE is responsible for the preparation and accuracy of the annual financial statements, the consolidated financial statements and the combined management report of PUMA SE. The consolidated financial statements were prepared in accordance with the International Financial Reporting Standards that apply in the EU, the requirements of the German Commercial Code (HGB), the German Stock Corporation Act (AktG) and the German SE Implementation Act (SEAG). Certain disclosures and amounts are based on current estimates by the Management Board and the management.

The Management Board is responsible for establishing and regularly monitoring an adequate internal control and risk management system concerning the consolidated financial statements and the disclosures in the combined management report. This control and risk management system is designed to ensure the accuracy and reliability of internal and external financial reporting, as well as the presentation and correctness of the consolidated financial statements and the combined management report. It is based on a series of process-integrated monitoring measures and includes necessary actions such as internal directives, organizational and authorization policies, system and access authorizations, relevant corporate guidelines and manuals, segregation of duties within the Group, and the four-eyes principle. These measures are regularly reviewed for adequacy and effectiveness by the Group Internal Audit, Risk Management & Internal Control department. There are areas for improvement in the further development of access and roles management for our IT systems, especially for migration projects; any control weaknesses are analysed in detail and appropriate countermeasures are undertaken.

For monthly financial reporting and consolidation, PUMA has a group-wide reporting and controlling system that makes it possible to regularly and quickly detect deviations from projected figures and accounting irregularities and, where necessary, to take countermeasures.

By means of established internal reporting channels, the risk management system can regularly identify events that could affect the Group's economic performance and its accounting process so that it can analyse and evaluate the resulting risks and take the necessary actions to counter them.

The Audit Committee of the Supervisory Board meets on a regular basis with the independent statutory auditors, the Management Board and the Group Internal Audit, Risk Management & Internal Control Department to discuss the results of the internal audits and statutory audits with reference to the internal control and risk management system as it relates to the accounting process. At the annual meeting on the financial statements, the auditor reports to the Supervisory Board (including the Audit Committee) on the results of the audit of the annual and consolidated financial statements.

STATEMENT ON THE ADEQUACY AND EFFECTIVENESS OF THE SYSTEMS

┌‎The Management Board also monitors the effectiveness of the risk management and internal control system as a whole. Accordingly, key aspects of the systems are reviewed on a quarterly basis as part of cyclical reporting. This is intended to ensure the following: the management of material risks with appropriate transparency, the discussion of individual issues in a suitable form and their traceability as well as the consideration of possible further developments of the systems. Supported by an established control environment, the continuous monitoring and improvement of the systems reflect the PUMA Group's open risk culture approach. For the time being, PUMA SE is not aware of any relevant circumstances beyond those described above that would essentially conflict with the appropriateness and effectiveness of the overall risk management and internal control system. Nevertheless, it should be noted that even systems that have been commented on as appropriate and effective are subject to inherent limitations. Accordingly, no complete prevention of any process violations and/or risks that actually occur can be guaranteed.‎└