my guess .. the cone and locknut are what hold the bearing adjustment . the shroud nut can be finger tight

it functions like a spacer might , between the cone and locknut . bring the outside to 10cm.. like the fork is ..

in fact if it drags on the dust shield add a thin flatwasher under it Or between the cone and locknut.


FWIW, some hubs on modestly priced bikes are using a rubber shroud for appearance and keeping lots of crud out.