Assystem - 2015 Registration Document

5

RISK FACTORS

RISKS RELATED TO THE ECONOMIC ENVIRONMENT

Please refer to Chapter 8.1 of this Registration Document for a description of the Group’s risk identification and management procedures. The Group has drawn up a map of its major risks in order to fine-tune the analysis of these risks in terms of the likelihood of their occurrence and their net impact ( i.e. after taking into account the risk reduction measures put in place by the Group which form part of its internal control system). The risk factors described below correspond to the elements included in the mapping of the Group’s major risks.

Assystem conducts its business in an ever-changing environment. The Group is therefore exposed to risks which, if they materialise, could have a significant adverse effect on its business, financial position or earnings. It considers that there are no significant risks to which it is exposed other than those described below. This Chapter presents the risk factors to which the Group could be exposed: risks relating to the economic environment, operational risks, legal risks and financial risks. For each risk factor covered details are given about its type and impact as well as the risk reduction measures put in place.

5.1 RISKS RELATED TO THE ECONOMIC ENVIRONMENT

Type

Impact

Risk reduction measures

Risk that the markets and geographic areas in which the Group operates may have a dilutive effect on margins. Risk that contracts entered into do not generate sufficient margins.

Erosion of gross margin and, ultimately, of operating profit.

Close monitoring of ongoing projects and new business by the management of the division concerned and provision of regular information to members of the management team. Review of gross margins for ongoing projects and new business.

Negative impact on gross margin and, ultimately, on operating profit.

Defined process for selection of projects and submission of bids (financial review of key project elements in particular: envisaged revenue, forecast margin, margin on completion for fixed-price projects) and authorisation by designated managers. Contract review process (conducted monthly within the different Business Units and subsidiaries, and quarterly at Group level for contracts representing revenue in excess of a threshold adapted to the activity and size of the said Business Units and subsidiaries or that inherently comprise certain risk factors, such as a large number of hours, a multi-year period, the technology used, etc.). Client creditworthiness investigations conducted when new contracts are taken on, and renewed regularly for contracts or clients already in the portfolio. Members of the Group’s accounting teams carry out the credit management function in order to regularly monitor the collection of trade receivables, track progress in the collection of outstanding receivables, and issue the necessary reminders. Procedure defined and applied for prior authorisation of recurring capital expenditure (primarily for software). This procedure sets out the authorised signatories within the operating entity and requires the signature of one or even two members of the management team for capital expenditure in excess of a given threshold. Capital expenditure represents a little more than 1% of the Group’s consolidated revenue, which is normal in Assystem’s sector of activities, and limits issues associated with this expenditure. Investments relating to the acquisition of equity investments and external growth are systematically brought to the attention of the Board of Directors for consultation, once they have been assessed by the management team and operations personnel.

Risk of (partial or total) non-recovery of trade receivables.

Negative impact on realisable and available assets and on operating profit.

Risk that investments made are not useful, are not properly authorised or do not generate the expected returns.

Negative impact on cash flow and operating profit.

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ASSYSTEM

FINANCIAL REPORT 2015