Risk management

Borussia Dortmund’s divisions are exposed to a wide variety of risks that are inseparably linked to the conduct of business.

The sections below focus on possible future developments or events which could cause Borussia Dortmund to perform either better than expected (opportunities) or worse than expected (risks). The respective impact of opportunities and risks are generally presented separately and are not offset against one other. Generally speaking, risks and opportunities are assessed over a mid-length term of three years. All risks of loss to which the Company is exposed (individual and cumulative risks) are monitored and managed within the risk management system. Borussia Dortmund assessed the identified opportunities with respect to their impact on budgeted earnings figures in the context of existing planning and reporting processes. Opportunities are considered and documented in a process that is independent of Borussia Dortmund’s risk management system.

The consolidated group for risk management purposes is identical to the consolidated group in the consolidated financial statements

A functioning control and monitoring system is essential for identifying risks early and for assessing and counteracting them. It is the responsibility of the internal risk management system to monitor and control such potential risks.

The risk management system is based on principles and guidelines laid out by the management. These principles and guidelines are designed to facilitate the early identification of any irregularities so that appropriate countermeasures can be taken immediately. In order to ensure the highest possible level of transparency, risk management has been incorporated into the organisational structure of the Group as a whole. All departments and divisions are required to immediately report any Company-relevant changes in the risk portfolio to the management. The risk management system is also an integral component of the overarching planning, steering and reporting process.

In financial year 2023/2024 as well, refinements were made to Borussia Dortmund’s risk management system as part of IDW AuS 340 (revised version), the standard for audits of the risk early warning system promulgated by the Institute of Public Auditors in Germany (IDW). These related primarily to improving the presentation of what impact individual risks have on liquidity as part of the risk quantification process in order to optimise the existing risk-bearing capacity concept. The existing risk policy was expanded and completed to include these aspects.

The currency and detail of the regular risk reports given to the governing bodies of Borussia Dortmund keep them informed of the Group’s current risk profile. Reports are submitted to the Director of Finance and management on a quarterly and (depending on urgency) ad hoc basis. The Audit Committee also receives quarterly reports. This ensures that the Company’s decision-makers have adequate flexibility to be able to monitor and manage risks. Furthermore, the Internal Audit department regularly reviews the risks on a sample basis in connection with the quarterly risk reporting and ensures process-independent monitoring of the risk management system.

This year, the risk inventory procedure implemented with the objective of cataloguing and assessing all risks has again proven effective as a management tool. Risks are identified, discussed and reviewed in consideration of current circumstances in one-on-one meetings or plenary sessions in order to assess the current likelihood of their occurring and their potential consequences.

In consultation with the risk owners, each risk is given a qualitative rating of between 1 and 4, with 1 indicating a low level of risk and 4 indicating a very high level of risk.

A risk impact assessment is carried out both before and after the identification and development of countermeasures to reduce the risk. The risk impact assessments are weighted before and after countermeasures based on a ratio of 1:2, with weighting prioritising the probability and consequences of each risk after countermeasures take effect. In mathematical terms, the risk impact assessment (before countermeasures) is derived by adding the probability of the risk and its consequences before countermeasures, while the assessment (after countermeasures) is derived by adding the probability of the risk and its consequences, and multiplying this figure by two.

If the assessment of an individual risk falls within the top third of the scale (a score of 17 to 24), Borussia Dortmund classifies it as a high-priority risk. Particular attention is paid to such risks, since they are capable of having a material adverse and long-term effect on the Company’s assets, liabilities, financial position and profit or loss. There are currently 27 (previous year: 27) risks that are classified as high priority.

In the context of applying the provisions of IDW AuS 340 (revised version) to evidence its risk-bearing capacity, Borussia Dortmund has conducted a quantitative assessment of all risks identified in the qualitative risk inventory procedure outlined. The expected loss value (net basis) of an individual risk from the risk quantification of all risks was also compared with a threshold value of EUR 1,000 thousand that Borussia Dortmund has defined as material. Risks that – on a solely quantitative basis – may not have a material impact on the net assets, financial position and results of operation may nevertheless be managed and treated as high-priority risks since they are of overriding significance for Borussia Dortmund.

Categorisation of risks

In accordance with the recommendations under German Accounting Standard DRS 20, and to ensure ease of reference, Borussia Dortmund divides its risks into main categories. The nine defined main categories (strategic risk, personnel risk, macroeconomic risk, competitive risk, liquidity risk, interest rate risk, credit risk, resources risk and ecological risk) as at the end of the reporting period are presented and explained in greater detail below.

All 61 identified risks that could have a direct impact on the Company fall within these categories. In comparison with the previous year, the total number of risks identified was unchanged.

One new risk (ill-fated investments in the professional squad) was added and one risk (lack of transfers/willingness to transfer) was no longer classified as one of the 27 risks that had been classified as high-priority in the past period.

Whereas the disclosures on opportunities and risks in the 2022/2023 Annual Report were primarily shaped by the war in Ukraine and its effects on the overall economic situation in Germany – where consumers are seeing their purchasing power diminish in the face of rising commodity, energy and food prices and consequently higher inflation as a result of the conflict –, the impact is no longer as pronounced in this year’s (financial year 2023/2024) disclosures because inflation and commodity, energy and food prices have largely stabilised once again. However, we are deeply dismayed that the conflict in the Middle East has escalated into another war, even if these hostilities currently do not have any material economic impact on Borussia Dortmund. While fears of a deeper and long-lasting recession are not currently materialising, this could become reality if the respective wars escalate further.

In accordance with the provisions of IDW AuS 340 (revised version), Borussia Dortmund has subjected all 61 identified risks under the risk inventory to an internal quantitative assessment (assignment of certain probability intervals and calculation of specific losses for every risk, where possible; application of average value method for non-quantifiable risks) so as to provide a complete picture of Borussia Dortmund’s risk-bearing capacity. Risk-bearing capacity is specified as the maximum level of risk that the Company can bear over time without jeopardising its status as a going concern. For this purpose, the overall risk exposure is compared against available equity and the prevailing liquid assets.

The following is a discussion of the 27 high-priority risks, which as part of the risk quantification process were all assigned an expected loss value (net basis) of at least EUR 1,000 thousand, in their respective categories.

Category 1 – strategic risk

Borussia Dortmund defines strategic risk as risk arising from incorrect business decisions, poor implementation of decisions or the inability to adapt to changes in the corporate environment. Strategic risk also arises from unexpected changes in market conditions and the environment in which the Company operates, which bring with them negative consequences for the Company’s assets, liabilities, financial position and profit or loss.

This category includes four high-priority risks:

The risk that financial planning is dependent on sporting success describes in principle the risk that failing to achieve planned sporting objectives could lead to a lack of adequate income or proceeds. To account for any and all developments both on and off the pitch, the Company revises and updates its longstanding financial and liquidity planning at least three times per year based on the latest premises. Past events, in particular the COVID-19 pandemic when external conditions changed faster than ever before, have demonstrated how important it is for planning projections to be modified on a permanent basis. In this financial year, the team’s unexpected incredible form in the UEFA Champions League meant that Borussia Dortmund repeatedly revised its earnings forecast upwards and informed the capital market thereof during the financial year (see ad hoc disclosures dated 14 March 2024, 17 April 2024 and 8 May 2024). In addition to the income statement and the statement of financial position, the forecasts also include the development of Borussia Dortmund’s liquidity. It allows the management to monitor the current and future financial position of the Company at all times and to take any necessary action. Due to developments with regard to income from international TV marketing in particular, the amount that a club is certain to receive for a given subsequent season varies greatly from a first-place finish to a seventh-place finish in the Bundesliga. Qualifying for the UEFA Champions League guarantees much higher proceeds than qualifying for the UEFA Europa League or UEFA Europa Conference League, let alone if the team fails to qualify for any international competition at all. Given this, action has already been taken to increase the variability of personnel expenses in the professional squad with regard to sporting performance, particularly in the UEFA competitions and the qualification for these competitions, and this will continue to be driven forward in the short to medium term and, to the extent possible, will be expanded to include all salary components. The objective of a corresponding worst case scenario is not to predict the future but rather to provide an overview of various contingencies and their effects and to better assist the management in its strategic planning.

Share price performance describes the performance of a security, an index, shares or a portfolio, but also the performance of the management of an investment fund with respect to its investment objectives. The Group is very conscious of the risk associated with the performance of Borussia Dortmund’s shares and continually analyses the Company’s value on the capital market and the consequences of it being undervalued. A key component of this risk is the impact of these factors on potential corporate action in the future and the Company’s appeal to business partners. This risk is countered through continual communication with the capital market. The shares have been listed on the Prime Standard segment of the Frankfurt Stock Exchange since May 2014 and were also admitted to trading on the SDAX. As a result of the restructuring of the DAX and other indices, Borussia Dortmund left the SDAX with effect as at 20 September 2021. Some two years later, Borussia Dortmund was once again admitted to trading on the SDAX with effect as at 25 July 2023. During the financial year, Borussia Dortmund again held several roadshows in Europe and the United States in an effort to keep existing investors up to date and bring any prospective investors on board. As expected, the capital market positively received the multiple ad hoc disclosures announcing that the earnings forecast had (once again) been revised upwards on account of the team’s performance in the UEFA Champions League, and the share price increased each time as a result. The fundamental shareholder structure, which features a high free float and key strategic partners, did not change during this financial year. In financial year 2022/2023, Borussia Dortmund offset Borussia Dortmund GmbH & Co. KGaA’s loss carryforwards/net accumulated losses against the revenue/capital reserves so that it can legally once again pay its shareholders a dividend in future financial years, provided it generates the necessary net profits. Prior to the COVID-19 pandemic, Borussia Dortmund’s established practice was to maintain continuity with regard to its dividend distributions, and the objective now is to return to that dividend policy.

Borussia Dortmund considers the third risk in this category to be the risk of conflicting goals of sporting and commercial success. It is important that Borussia Dortmund continues to pursue balanced business policies with the aim of ensuring that the club remains competitive and also focussed on meeting the financial performance indicators. Borussia Dortmund will continue to avoid material financial risks that could arise on account of uncertain sporting successes. As in previous years, Borussia Dortmund further counters this risk by setting strict budgets for the individual divisions and undertaking corporate planning on a revolving basis using various planning scenarios. Furthermore, the Company also uses planning scenarios to calculate various earnings and liquidity effects potentially presenting additional opportunities for financial investment or shortfalls. It is of fundamental importance to permanently modify the planning projections and to balance the need to remain competitive on the pitch and ensure economic stability and success on the one hand with the corresponding countermeasures that have already been taken to reduce the likelihood of the risk occurring on the other, as past events, in particular the COVID-19 pandemic when external conditions changed faster than ever before, have so clearly demonstrated. The transfer business remains a key action area for Borussia Dortmund and is one of the most important sources of income in the business of football. Achieving high sums for transfers often involves a loss of sporting quality within the squad, but after carefully weighing up all of the athletic and business aspects it is possible that value-driven transfers may also be concluded contrary to the Company’s sporting interests, as was the case with the transfer of the player Jude Bellingham to Real Madrid in July 2023.

IT cyber risks are the fourth high-priority risk in this category. These risks are closely linked with protecting confidential information. They are generally understood as the risks posed while navigating a digital and interconnected world. In specific terms, on the one hand IT cyber risks involve the possibility of wilful and targeted cyber attacks on data and IT systems. The consequences of these attacks can include: compromising data confidentiality (e.g., data losses, data espionage), loss of system or data integrity (e.g., data corruption by means of malware), compromising IT system or data availability (e.g., internal business interruption, outages in external communications). On the other hand, IT cyber risks arise from the opportunity for large volumes of information to be disseminated widely, cheaply and at breakneck speed (e.g., e-mail campaigns against the Company, calls on social media to boycott the Company) and from social hacking. Cyber criminals are increasingly targeting German businesses and becoming more professional, and the number of attacks is increasing dramatically each year. In line with the generally elevated threat situation, Borussia Dortmund also continues to observe more and more requests from dubious places in the IT landscape (network, firewall, etc.). Borussia Dortmund seeks to counter these IT cyber risks by reducing the risk of occurrence through investments in data security and data protection. That includes expanding the firewall to protect against external attacks, enhancing network security by means of network segmentation with certificate-based authentication, bringing a new back-up system online and continually pressing ahead with Project Security, a general initiative to identify and address potential security vulnerabilities. For that purpose, Borussia Dortmund also maintains close ties to an external service provider that specialises in guarding against the latest IT risks. In addition to investing in data security and data protection, Borussia Dortmund has also established a learning management system that covers mandatory training sessions and awareness training on IT and cyber security risks for Borussia Dortmund’s employees and that tracks their progress.

Category 2 – personnel risk

The importance of human resources to companies is growing. The Company’s success is largely dependent on the commitment, motivation and skills of both its sporting personnel and managerial/administrative staff.

This category currently includes five high-priority risks:

Protecting confidential information is also very much so directly connected with IT cyber risks and is a subject that remains in the public eye. Never before has data protection posed so many challenges. In particular, the increasing internationalisation of day-to-day business operations necessitates a detailed understanding of the respective data protection regulations applicable in individual countries. In addition, technical progress harbours many challenges, especially in relation to online data. Hackers stepped up their attacks in recent years, releasing the personal data of politicians, celebrities and others. Action has to be taken to prevent the unauthorised access and manipulation of data. The pace at which new threats are developing is being accelerated by the emergence of new artificial intelligence (AI) technologies. Artificial intelligence is technology that enables machine applications to simulate human intelligence. That means that machines that work with artificial intelligence can learn and assess and solve problems almost as good as humans can. There are already documented cases of automated attacks or fraudulent acts being committed with the help of AI technologies, and the number of cases continues to rise steadily. Confidential data that is processed, transferred or stored online must be encrypted. The data should remain encrypted and protected even if the online application is compromised. The Head of IT, the heads of the individual application areas and the data protection officers are responsible for initiating the data; the developers and administrators are responsible for implementation. For instance, the steps taken as part of the “Roll-out Identity Management” project included the creation of a blacklist for various countries and the implementation of two-factor authentication in the case of conspicuous user behaviour. To meet the increased requirements for cyber security and IT in general, action has already been taken to significantly increase staffing levels in IT, and this will continue be driven forward in the short to medium term. Although protecting confidential information for the most part concerns the IT landscape as referred to above, it also involves for instance protecting the hard copies of individual employees’ personnel files against unauthorised access by means of a clear key concept, laying down specific rules for post room staff when opening incoming mail, or ensuring that all employees sign a non-disclosure agreement.

The risk of periods during which professional players are unable to play (rest periods) can have a major impact on the Company’s success, because they mean that team managers are unable to play the best possible team for the entire season, putting sporting goals in jeopardy. The absence of key players in particular is often difficult to compensate for. The reasons for rest periods include personal match bans, injury or excessive stress. Excessive stress may arise more frequently going forward due to a more tightly packed match schedule in light of the UEFA EURO 2024, the UEFA Champions League reform for the 2024/2025 season, which will lead to more matches, and Borussia Dortmund’s participation in the 2025 FIFA Club World Cup, even though Borussia Dortmund seeks to minimise player absences by means of individual workload management based on data analysis (“injury prevention”). We deliberately ensure that back-ups are available for every position within the squad so that we can absorb the absence of any individual player. Furthermore, new employees were hired in the area of performance diagnostics at the beginning of the 2023/2024 season in order to strengthen monitoring and help prevent injuries. These steps proved successful: internal analyses showed that Borussia Dortmund significantly decreased the amount of preventable muscular injuries within the professional squad.

The world of sport has witnessed a number of terrible accidents in recent years. The tragic loss of human life takes precedence – that goes without saying – but the economic consequences for the businesses involved have also been immense. There thus continues to be a risk of a loss of the player base due to travel and other accidents, terrorist attacks and miscellaneous; therefore, Borussia Dortmund continues to classify this risk as high priority, particularly in light of the currently heightened terror threat in Germany and the world.

The high-priority risk of legal transgressions by professional players covers risks arising from misconduct by the professional squad. This includes doping, placing prohibited bets, manipulating matches or engaging in inappropriate behaviour on social media. The consequences of such misconduct may include match suspensions and reputational damage for players and the club, or legal disputes. The action that Borussia Dortmund takes to mitigate this risk includes systematic education and preventative measures to raise awareness among the professional squad and help them avoid such misconduct, even though Borussia Dortmund cannot control the private lives of its players.

The risk of ill-fated investments in the professional squad was added as a new high-priority risk. This describes the risk that, for whatever reason, a professional player who is signed fails to live up to the expectations placed in them (e.g., sub-par performances in matches prevent the team from achieving success or the player increasing their market value, both of which would otherwise generate income for the club) and causes significant personnel and investment expenses to be incurred. Due to the increasingly fierce competition for football’s best talents – also in light of the cash-rich competition in Saudi Arabia and England and the increasing frequency of “multi-club-ownership” models, where one owner or majority shareholder owns multiple clubs –, it is all the more important to sign these talented players to Borussia Dortmund at an even younger age. However, this also involves higher risks, because, as a general rule, the younger a player is, the more uncertain their actual future development. That said, ill-fated investments can also be made in experienced players.

Category 3 – macroeconomic risk

Macroeconomic risk arises as a result of Borussia Dortmund’s dependence on general economic and political developments.

There are currently six high-priority risks that fall under macroeconomic risks:

Borussia Dortmund has classified unfavourable macroeconomic developments accompanied by high unemployment and slow economic growth or an economic downturn, as the first risk in this category.

According to initial data from the Federal Statistical Office of Germany, the small boost the German economy experienced at the start of 2024 did little to change the economic status quo. On the one hand, the Federal Statistical Office revised its data for the fourth quarter of 2023 and thus the statistical carry-over effect downwards, and on the other hand, the bump in the first quarter of 2024 was not least due to favourable weather conditions and the resulting growth experienced by the otherwise crisis-stricken construction industry. Therefore, in light of the ongoing structural problems, the Hamburg Institute of International Economics (HWWI) continues to expect only a moderate upswing for the German economy in 2024 and 2025 and for economic growth to be on average only between 0.25 and 1.0%. The rise in consumer prices has since slowed to below 2.5% and is thus close to stabilising. Although prices at the upstream stages are still falling compared to the previous year, the decline appears to have arrested since the beginning of this year. This and the noticeable rise in wages should further slow disinflation. The consumer price index is expected to rise on average by just over 2.0% p.a. in this and the next year. These forecasts are subject to a relatively stable global economic situation. However, the current geopolitical uncertainties pose a risk to trade, global market prices and not least for the energy supply. Nevertheless, the economy will also need to be bolstered by domestic economic policies. (Source: Hamburg Institute of International Economics [HWWI], 7 June 2024).

The risk of right-wing extremism is a societal risk that continues to increase. Particularly in light of the current Israel-Gaza war, Borussia Dortmund continues to take a clear stance against right-wing extremism and discrimination of any kind. Borussia Dortmund counters this risk through prevention efforts and disciplinary action, acting in concert with a broad network of cooperation partners. By clearly speaking out and working to combat racism, anti-Semitism, hostility towards the LGBTQIA+ community, sexism, violence or discrimination of any type, Borussia Dortmund will continue to fulfil its social responsibility by ensuring that the atmosphere in and outside SIGNAL IDUNA PARK is welcoming, cosmopolitan and diverse.

The increased willingness of certain individuals to commit violence and defame and insult others at stadiums is a risk that will continue to require the utmost attention. Fan violence remained an issue during reporting period. Prevention efforts and security plans ensure that groups which frequently resort to violence can be identified in advance, helping to prevent altercations to the greatest extent possible. Borussia Dortmund will continue to counter this risk with enhanced security checks, camera surveillance, stadium bans and criminal complaints. Additional stadium safety measures will continue to include specific structural changes to entrances going forward. Furthermore, Borussia Dortmund and other clubs from North Rhine-Westphalia have joined forces in the “Stadionallianz gegen Gewalt” initiative in an effort to curb fan violence. They work together with the police with the aim of identifying, isolating and bringing offenders to justice more quickly.

The categorisation of social media activities as a high-priority risk reflects the fact that new technologies not only have potential for development, but also harbour risk potential. Social media is no longer used solely for communicating with fans and followers, but increasingly also serves as an advertising platform for marketing and sponsoring-related activities. Borussia Dortmund has vastly expanded its digital presence, among other things due to the recent COVID-19 pandemic and the restrictions at times placed on direct contact with fans as a result. This also includes monitoring those activities appropriately. Furthermore, compliance with legal requirements – such as the requirement to place advertisements – on Borussia Dortmund’s many different social media channels is key to avoiding legal disputes and reputational damage. This applies to both Borussia Dortmund’s own channels and its cooperation with content creators. Borussia Dortmund selects these collaborators in accordance with internally-defined criteria before entering into a contractual relationship with them. For the first time, one of Borussia Dortmund’s eFootball teams will compete in the DFL’s Virtual Bundesliga (VBL). The DFL licensing conditions now stipulate that all Bundesliga clubs must field a team to play in the Virtual Bundesliga, which has been one of the Deutsche Fußball Liga’s (DFL) official competitions since 2022. This underscores the growing significance of eFootball. However, this also results in certain dependencies on external platforms and service providers, which could limit the Company’s own options/influence. In order to safeguard the Company’s image and prevent the unauthorised disclosure of internal information, all Borussia Dortmund employees must adhere to the Company’s social media guidelines.

More stringent legal regulations continue to be classified as a high-priority risk due to the plethora of new rules and regulations. The provisions of the EU Corporate Sustainability Reporting Directive (CSRD) that will apply in future, which Borussia Dortmund is painstakingly preparing for by familiarising itself with the subject matter and hiring additional staff, and the new legal provisions pertaining to money laundering and supply chains are just a few examples. In 2024, the EU adopted new regulations concerning money laundering and supply chains that are expected to become relevant for Borussia Dortmund in 2029. As such, the long transition phase should provide plenty of time to prepare for these regulations. Borussia Dortmund is currently already voluntarily complying with the key requirements of the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz, “LkSG”). In general, such tightening of laws and regulations usually involves a significantly higher administrative workload for Borussia Dortmund, which ties up human resources and may necessitate new hires. Where necessary, greater use is also made of advisory services.

The risk arising from political developments also continues to be classified as high priority. Whereas the previous year was primarily shaped by the war in Ukraine and its effects on the overall economic situation in Germany – where consumers are seeing their purchasing power diminish in the face of rising commodity, energy and food prices and consequently higher inflation as a result of the conflict –, the impact for Borussia Dortmund is no longer as pronounced in this financial year because inflation and commodity, energy and food prices have largely stabilised once again. However, we are deeply dismayed that the conflict in the Middle East has escalated into another war, even if these hostilities currently do not have any material economic impact on Borussia Dortmund. While fears of a deeper and long-lasting recession are not currently materialising, this would become reality if the respective wars escalate further.

In September 2023, in an effort to stabilise prices, the European Central Bank (ECB) increased the key interest rates for the tenth time in a row (the main refinancing operations rate increased to 4.5% and the deposit facility rate to 4%). Since Borussia Dortmund finances a portion of its investments in property, plant and equipment by taking out loans, it will also be impacted by the higher interest rates. While the global real estate crisis – which was triggered by falling property values, in particular on the US commercial property market, and rising refinancing costs – is also being felt by German banks, there is as yet no talk of a veritable banking or financial crisis in Germany, as was the case in 2008 for instance. However, the matter must continue to be monitored closely as it could significantly affect the overall economy, interest rate levels, inflation, etc. A close eye is also being kept on the fraught relations between China and Taiwan and the potential consequences for the global economy and supply chains, with the hope being that the situation does not escalate militarily.

Category 4 – competitive risk

Competitive risk relates to factors stemming from competition in the domestic and international professional football business.

This category includes seven high-priority risks:

Interruptions to match operations can have immense economic ramifications because nearly all of Borussia Dortmund’s streams of revenue are dependent on or influenced by match operations. The recent COVID-19 pandemic underscored how economically dependent the club is on a trouble-free season. In the 2023/2024 season, fans protested the DFL’s investment deal, temporarily leading to numerous match interruptions in the Bundesliga, with some matches nearly having to be called off entirely. Ultimately, the situation returned to normal after the deal was cancelled and Bundesliga matches were once again played without interruptions. This demonstrates the many reasons there can be for match operations being (temporarily) suspended.

The second risk classified as high-priority in this category is the change in income from TV marketing. After DFL Deutsche Fußball Liga’s auctions for TV rights led to a steady rise in income from TV marketing in recent years, the COVID-19 pandemic meant that the auction for the 2021/2022 to 2024/2025 seasons did not bring as much income for the clubs of the first and second Bundesliga divisions as in previous rights periods; in total, roughly EUR 4.4 billion will be distributed over this period. This provides a solid planning basis, but also a notable reduction – in particular compared with pre-pandemic levels and the English Premier League. Specifically, the international marketing of the German Football League (DFL Deutsche Fußball Liga) continues to fall short of the ambitious expectations. After the DFL Members Assembly initially adopted a resolution in December 2023 to enter into a strategic marketing partnership at the league level in order to drive forward digitalisation and internationalisation so as to leverage additional growth opportunities, the DFL Executive Committee of DFL Deutsche Fußball Liga e.V., due in part to fan protests, unanimously resolved at its extraordinary meeting on 21 February 2024 to not continue the process of entering into a strategic marketing partnership. The DFL Deutsche Fußball Liga’s tender for the TV rights for the 2025/2026 to 2028/2029 seasons is currently on hold.

UEFA’s Financial Fair Play Regulations, which were launched in 2011 with the aim of improving the financial health of European football, have now been fundamentally revised. Now renamed the Financial Sustainability Regulations, they are aimed at making European football more resilient to external shocks, promote sound investments and make football more sustainable in general. At the core of the new regulations are three pillars – cost control, stability and solvency. Based on the “squad cost controls”, clubs may in principle only spend a specific percentage of their income on squad costs, including transfers and consulting fees. In addition, the number of audits of clubs’ solvency has increased to four per year – one by national license inspectors and three by financial experts from UEFA. Potential penalties extend beyond financial sanctions and may involve forfeiting points, incurring transfer bans and being disqualified from tournaments. The risk of failing to comply with the Financial Sustainability Regulations and potential exclusion from international competitions or potential financial sanctions would have serious financial consequences for Borussia Dortmund. The already very lucrative distributions available from UEFA and the international prestige derived from taking part in UEFA competitions underscore the great importance of both qualifying and obtaining the requisite licences for international club competitions. The potential income set to be gained will likely increase further once UEFA introduces its reform of the Champions League, which from the 2024/2025 season onwards will feature eight games in a league format instead of the previous six group matches. Therefore, to minimise this risk, compliance with the relevant requirements and target/actual comparisons are constantly reviewed.

As past experience has demonstrated, the risk of key players switching clubs can materialise at any time at Borussia Dortmund. The departure of key players who are part of the club’s future plans would not only weaken the team at certain positions, but also as a whole. Even if success rarely rests on the shoulders of any single player, the roster should be planned so that any unexpected departures do not leave holes that would need to be filled at short notice with players of equal quality. In an attempt to mitigate the sporting consequences of key players switching clubs, Borussia Dortmund plans its roster well in advance, including by binding players to long-term contracts and identifying potential replacements, uses its high transfer proceeds to reinvest in the squad and employs a wide network of scouts.

The further risk in this category is the risk of a potential stadium catastrophe. Going forward, the Company will continue to regularly assess the quality and reliability of security staff and specifically train them in the prevention of catastrophes. Structural improvements to SIGNAL IDUNA PARK for the purposes of enhancing security, safeguarding and monitoring the access roads, and safeguarding the property during visits on non-match days are just some of the countermeasures currently taken by Borussia Dortmund to provide security at the stadium. In December 2023, the third-division match between Borussia Dortmund II and Preußen Münster was called off after a suspicious object was discovered in the away team block in the “Rote Erde” stadium. This incident underscores the club’s close working relationship with the police that is built on trust and the combined efforts to prevent any potential catastrophes.

Borussia Dortmund uses the summer break each year to invest in SIGNAL IDUNA PARK as well as for construction work and refurbishments. The stadium has been expanded three times since opening in 1974 with a capacity of 54,000. The continual repair and maintenance work – the paramount focus of which is always structural integrity and safety – ensures that the stadium meets the latest standards in terms of safety, security and comfort. Compared to many other Bundesliga stadiums that were constructed for the 2006 World Cup, SIGNAL IDUNA PARK is one of the Bundesliga’s oldest stadiums in use. Given that Borussia Dortmund regularly invests large sums in SIGNAL IDUNA PARK and in light of the increasing requirements applicable to stadiums, including with respect to spectator safety, the club has classified capital expenditures needed for SIGNAL IDUNA PARK as a high-priority risk. Given the advanced age of SIGNAL IDUNA PARK, Borussia Dortmund makes regular investments in the stadium. In addition to contributing to the aforementioned paramount focus on the structural integrity of the stadium, these investments are intended to keep Borussia Dortmund competitive and contribute to its environmental sustainability. The current investments in SIGNAL IDUNA PARK that extend beyond purely maintenance purposes serve in particular to digitalise and modernise the stadium (e.g., building a logistics centre to provide greater flexibility and improve the logistics of supplying food and beverages to SIGNAL IDUNA PARK on match days and providing 5G coverage throughout the stadium), promote environmental sustainability by implementing decarbonisation projects as part of the decarbonisation strategy and comply with the requirements as part of UEFA EURO 2024.

The risk of consequential damage arising from mining, which also affects, but is not limited to, SIGNAL IDUNA PARK, represents another high-priority risk. Coal mining has ceased in Germany. While the memories remain, so do the pitfalls, because the effects of mining never fully disappear. Hardly any other federal state is faced with as many sinkholes as North Rhine-Westphalia. It is estimated that the state has some 60,000 abandoned mining shafts and tunnels. The exact number is not known because mining in the region dates back to the Middle Ages. Only half of all pits and tunnels have been recorded. Borussia Dortmund uses the properties adjacent to SIGNAL IDUNA PARK for car parks or to store products and equipment needed for match operations. When renovating the Rote Erde stadium last year, construction workers had to fill coal shafts with concrete, which has caused the soil structure to become porous in recent years. This lengthy process had drawn out the renovation work. There is always the risk of consequential damage arising from mining whenever there is any construction work on Borussia Dortmund’s property. All construction projects must still first undergo a survey of the potential for consequential mining damage and are subject to financial and timing risks.

Category 5 – liquidity risk

Liquidity risks include all risks in connection with cash flows and financial burdens.

This category includes four high-priority risks:

The loss of significant financial backers and sponsors could continue to have a material adverse effect on Borussia Dortmund’s liquidity in the future. Borussia Dortmund continuously revises its longstanding accounts receivable management system in line with the prevailing conditions and increasing globalisation. Despite economic stagnation in the eurozone and the rather sluggish global economy, there is currently nothing to indicate the loss of a significant financial backer/sponsor connected with Borussia Dortmund. Borussia Dortmund is in close contact with its key partners and its marketing firm SPORTFIVE Germany GmbH, with which it maintains a close relationship built on trust. Borussia Dortmund has entered into (long-term) contracts with its strategic partners (SIGNAL IDUNA Group until 2031, PUMA International Sports Marketing B.V. until 2028, and 1&1 Telecommunication SE and Evonik Industries AG, each until 2025). Various new sponsorship contracts and contract extensions tentatively suggest that the relatively tense economic situation has not significantly diminished the willingness of existing and prospective partners to enter into sponsorship arrangements. Borussia Dortmund attempts to avoid any clustering of risks with regard to the industries its sponsors operate in. This ensures a broad mix of sponsorship income that is essentially not subject to any increased industry risks.

The risk of bad debts due to insolvency remains classified as a high-priority risk. The global economy, which remains rather sluggish, will continue to impact the solvency of companies and football clubs alike. Borussia Dortmund anticipates that problems could arise with regard to trade receivables. As part of its ongoing internationalisation, Borussia Dortmund is increasingly taking on foreign receivables and, in particular, receivables from Asia, which experience has shown to be subject to a higher default risk. The primary objective continues to be keeping bad debts to a minimum and to ensure that the Company has the liquidity it needs at all times. That is why it is all the more important to follow through on the action already taken, such as conducting credit checks on foreign businesses or changing the general contractual framework to include high up-front payments. Dunning procedures are likewise particularly vital. Similarly, Borussia Dortmund, its partners and its marketing firm SPORTFIVE Germany GmbH remain in close contact with respect to receivables for advertising income. In addition to the measures already referred to, factoring arrangements for transfer receivables can also be used as a means of managing liquidity.

Borussia Dortmund places utmost importance on maintaining its liquidity and, after assessing its risks, therefore continues to classify the risk associated with this as high priority. The financial and liquidity planning apparatus that has been in place for many years considers a variety of scenarios and different premises, and is regularly adjusted to account for current conditions. The scenarios calculated covered in particular different levels of success achieved by the team and various external conditions in order to identify any liquidity bottlenecks early and to initiate appropriate countermeasures designed to secure liquidity, such as factoring arrangements for transfer receivables. Furthermore, an overdraft facility of EUR 75,000 thousand was available at the end of the reporting period that will also be available for the upcoming financial year. Furthermore, Borussia Dortmund’s long-term investments in property, plant and equipment are financed with long-term loans.

In order to keep the risk associated with the volume of player salaries as low as possible, the club budgets personnel expenses with transfer deals in mind at the beginning of each season. The primary focus is on the fixed components of the players’ remuneration, since these are independent of the team’s performance during a given season. Variable remuneration components are also considered when planning the budget, but generally only apply once certain sporting objectives are achieved that in turn generate additional income. The personnel expenses incurred are continuously monitored, extrapolated on the basis of current circumstances, and reported to the management. Action has already been taken to increase the variability of personnel expenses in the professional squad with regard to sporting performance (particularly in the UEFA competitions/qualifying for these competitions) and the associated effects on earnings and liquidity and going forward, to the extent possible, will be expanded to include all salary components so as to cushion any potential shortfalls by reducing personnel expenses. However, no matter what efforts are undertaken to increase variability, it must be borne in mind that, given the overall situation on the transfer market, it will not always be possible for Borussia Dortmund to have its maximum demands met without having to compromise on the quality of the player base.

Category 6 – ecological risk

The risk of environmental and climate change continues to be classified as a high-priority ecological risk.

The term climate change, or rather anthropogenic climate change, refers primarily to the current global and regional changes in the climate caused by humans. Global warming and climate change are the greatest challenges facing planet Earth and humanity. The associated risks are complex and interrelated. They pose an existential threat, and their effects can be both direct (such as extreme weather events) and indirect (such as soil, water and air pollution and the exacerbation of social inequalities). In keeping with the stated goal of the Paris Climate Agreement, adopted in December 2015, to hold the increase in the global average temperature to well below 2°C and if possible to below 1.5°C, the EU member states resolved that by 2030, greenhouse gas emissions should be reduced by at least 55% compared to 1990 levels. Furthermore, Germany set itself additional targets when it passed the new Climate Protection Act that entered into force in August 2021: Greenhouse gas emissions are to be reduced by 65% compared to 1990 levels by 2030, and the country should be carbon neutral by 2045. In order to promote the increased use of renewable energy, the German federal government adopted new carbon pricing rules in 2021, which will gradually raise carbon prices every year. This means that the use of fossil fuels will become more expensive for Borussia Dortmund every year. In particular, match operations and managing Borussia Dortmund’s facilities require a large amount of energy. Moreover, modernising SIGNAL IDUNA PARK is only possible to a limited extent due to the age of the stadium and its infrastructure. Nevertheless, everything possible is being undertaken to implement an array of measures to increase energy efficiency at SIGNAL IDUNA PARK and Borussia Dortmund’s other facilities. Borussia Dortmund implements measures, including but not limited to, determining our carbon footprint, developing a decarbonisation strategy for our facilities, operating energy and environmental management systems, offsetting the CO₂ emissions from our team flights and offering environmental education programmes. The financial considerations surrounding CO₂ emissions notwithstanding, the public debate about professional football’s impact on climate change is becoming increasingly more heated, and clubs can expect to be exposed to reputational risks if they cannot demonstrably reduce or, if possible, avoid the CO₂ emissions generated by match operations and thus fail to comply with the German Climate Protection Act. Furthermore, global warming can increasingly impact match and training operations through extreme weather events such as heavy rain or heat waves. Modernising the infrastructure and promoting renewable energy can help to cut CO₂ emissions but also involves significant upfront costs. Borussia Dortmund attempts to make a positive contribution to climate protection by leveraging its considerable appeal, through the many ways in which it can mobilise its fan base, and by working together with partners.

The Group is not presently exposed to any high priority risks in the interest rate risk, credit risk and resources risk categories.