Outlook

(e.g., by using master agreements in which prices are fixed for the entire contractual term with price revision clauses when certain margins are exceeded). Specifically, with respect to the electricity sector and the various resolutions changing the cost of energy issued by ARERA in the past few years, changes in the context continue to be constantly monitored. Reference should be made to the “Legislative and regulatory framework” paragraph for more information in this respect. To limit possible situations in which the company relies on builders/suppliers and to reinforce its railway knowhow, the company has begun the progressive in-sourcing of critical maintenance and the construction of infrastructure, plant technological operation and production processes for railway components and, for strategic supplies, has defined emergency stock levels, how to reconstitute these stocks and supplier diversification policies. In addition to this, there were initiatives designed to identify a general risk assessment model for RFI suppliers to help make the best choices for materials (including strategic) supplies, as well as specific actions to benefit sustainability by extending the inclusion of Corporate Social Responsibility (CSR) performance scoring to all technical/economic tenders called by RFI.

ICT (Information and Communication Technology) risks The company operates using IT systems/platforms to coordinate and plan activities with respect to train traffic management and the related services, the sale of train paths, procurement management, maintenance and investments, to monitor stocks and for a number of other activities, including the management of accounting processes. The hardware and software that is used could be damaged by human errors, natural disasters, power outages or other events. Unexpected problems in structures, system failures or cyber attacks could influence service quality and cause interruptions and slowdowns and/or block company activities with resulting financial impacts and on its reputation. In order to ensure the continuous availability, integrity and confidentiality of IT data, RFI is equipped with prevention and protection systems (back-up procedures, authentication and use profiling procedures, firewalls, etc.) and has also strengthened and expanded its security (via vulnerability checks, penetration tests, etc.) and business continuity/disaster recovery processes, particularly for business-critical systems. In connection with the establishment of FSTechnology, the FS Italiane group’s ICT service provider, and the consequent transfer of RFI’s ICT business unit to this company, an Interdepartmental Committee was set up to coordinate IT investments and development and control IT service levels and quality. In general, the committee defines and implements the IT system development plan and the related priority actions in accordance with the business plan and the related business targets. It also ensures the most efficient and effective interfaces with FSTechnology, to guarantee business continuity and meet development/design and system running needs.

Effects of the spread of infectious diseases The global spread of a disease, creating epidemiological or pandemic emergencies that affect local populations (such as COVID-19 or coronavirus) may cause, in addition to a deterioration of macroeconomic conditions, slowdowns in business activity due to restrictions imposed by national and foreign authorities, the unavailability of personnel, difficulties faced by customers in using collective mobility services and disruptions in the supply chain, which may have adverse effects on the company’s results. The company has adopted processes and procedures that support the identification, management and monitoring of events with potential impacts on its resources and business. These processes are meant to optimise the timeliness and efficiency of the actions taken.

BUSINESSOUTLOOK

The company expects to operate in a macroeconomic scenario presenting moderate prospects of growth for Italy in 2020. Global economic risks relate to the trade war between the US and China, although it is showing signs of attenuation, and a substantial slowdown in the Chinese economy the effects of which are not yet foreseeable, partly due to the pandemic. Projections for the Italian economy, which are highly dependent on the external factors described above, show slight growth in GDP in 2020, ranging from 0.3% to 0.5%, and only reaching 0.9% at the end of 2022 when the international cycle is expected to have regained vitality necessary to support exports and investments. The expected progressive recovery of global demand and expansive financial conditions should drive investments, despite their persistent uncertainty. The labour market is also expected to reflect these favourable circumstances, as the unemployment accumulated over the course of the long financial crisis should continue to decline, while inflation should settle at around 0.9% in 2020, before rising to 1.4% in 2022. In this context, to stimulate a weak economy that is taking longer to recover than it should, the ECB’s monetary policy has remained substantially the same, which is to say focused on keeping interest rates near zero. In line with the current economic situation, exports and imports were weak in the year just ended and will remain so in 2020, gradually improving in the subsequent years.

This macroeconomic context forms the basis for the 2020 budget approved by the board of directors on 18 December 2019, in line with the 2019-2023 business plan approved by the board of directors on 6 February 2019. The 2019 - 2023 plan is geared towards creating economic, environmental and social value, with a focus on maintaining the quality of production, strengthening the company’s thirst for new challenges, its penchant for technological innovation and digitalisation and its commitment to developing human capital throughout the FS Italiane group companies. In a continuously evolving context, the company has set the goal of devoting increasingly more attention to safety, digitalisation and sustainability, both as a long-term strategy and in its review of day-to-day decisions and good practices, making these the cardinal principles of its vision and using technological innovation as a vital lever to achieve them. To drive a widespread company culture of sustainability, RFI is working with the parent to develop specific training and awareness initiatives that progressively reach the company’s entire population. The company’s new strategic vision places a greater focus on its railway core business, in accordance with the shareholder’s strategic guidelines and an approach which places the customer at the centre of its operating and industrial processes. Therefore, RFI confirms its five priority action areas: Stations (with a new concept of the station as a modal integration hub and by redeveloping the areas around the station), Local public transport (upgrades, greater speed and more stations), Long haul (upgrades and greater speed on the main European lines, and airport links), Logistics (connecting ports, interports, production districts and greater international cooperation between operators), and Environmental and social aspects (water and energy efficiency, green procurement and allocating assets not used in operations for social purposes).