DERICHEBOURG - Universal registration document 2018-2019

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Group management report Risk factors

Risk factors 3.3

relating to the businesses that they manage. In carrying out this assessment, they are supported by the Group’s support services (Financial Department, Secretariat General, Insurance Department, Technical Department, Legal Department and CSR Department). Two other risk mappings were conducted during the fiscal year: one as part of the application of the provisions of the Sapin 2 law and the other covering CSR risks.

The risk analysis and monitoring process 3.3.1 An initial mapping exercise covering the Company’s general risks was prepared during 2018. It will be updated at regular intervals. The Board of Directors is kept informed of changes to the Company’s principal risks. In the context of the operating organization, the directors of the operating entities are responsible for identifying and assessing the risks

Overview of principal risks identified and the risk management system 3.3.2

Risks

Risk management systems Geopolitical risks and economic cycle-related risks

The introduction of customs barriers leading to the segmentation of international trade could have a negative impact upon the prices and/or volumes of recycled materials processed by the Group. The industries that consume the products sold by the Group’s Recycling business (steel, metallurgy) are considered to be cyclical. A slowdown in these cycles may affect the profitability of the business. The European and Turkish steel industries rely on the strength of domestic steel consumption in China. When this consumption falls, the pressure from low-cost Chinese exports increases and competes with European and Turkish steelmakers. The Group has indirect exposure (China for non-ferrous metals, Turkey for ferrous scrap metals) to countries outside of Western Europe where the Group carries out its principal business activity. A deterioration in the economic situation of these countries may indirectly affect (lower prices or change in trade flows) the business activity of the Group as a whole. Environmental Services’ largest customer represents 14% of its revenue, and the five largest represent around 30%. The financial failure, or a reduction in commercial relations with one of these customers, could affect the Group’s profits.

These exogenous risks cannot be controlled by the Group. A low inventory policy is likely to limit the impacts should situations of this kind arise, as would the policy seeking to protect unit margins.

Country risks

This risk cannot be completely controlled. A policy of diversifying the Group’s customer base contributes to lowering these risks.

Customer risks

The Group’s practice is to monitor, on an almost systematic basis, its customer outstandings, to insert retention of ownership clauses in its contracts and to obtain the majority of payment for major exports before goods are unloaded. A customer diversification policy is also likely to reduce this risk. The logistical framework (access to ports) needed for this diversification is in place. Regular high-level meetings are held with major customers in order to assess the level of satisfaction of customers and service providers. A customer diversification policy has been initiated. It is likely to reduce this risk in future. The Group has a policy of regularly maintaining its facilities. Intermediate products could be sold in their current condition on less favorable terms. The Group has undertaken to duplicate certain equipment: a second refinery (different technology) has been commissioned and flotation sorting is under consideration.

Multiservices’ largest customer represents 16% of this division’s revenue. A significant reduction in services provided could affect the Group’s profits.

Operating risks

Prolonged unavailability of industrial equipment without back-up: certain sorting or refining equipment is located at only one Group site. Its prolonged unavailability could significantly affect the Group’s business.

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