technicolor - 2018 Registration document

3 RISKS, LITIGATION, AND CONTROLS RISK FACTORS

This Chapter describes in the first section the main risks identified by the Group that could affect its businesses, financial situation or sustainability. Additional risks which are either not identified or which are considered today as not significant may also have a significant impact on the Group’s performance. The next sections describe respectively litigation, internal controls, and insurance. RISK FACTORS 3.1 GRI [102-15]

OPERATIONAL

PRODUCTION SERVICES

DVD SERVICES

CONNECTED HOME

Customer concentration and contract negotiation •

Client concentration and contract • negotiation Dependency on client performance •

Customer project management •

Attract, develop & retain creative, • production, and technology talents

Labor force availability •

Supply chain and manufacturing •

Supplier and key component • dependency Supply Chain management •

Cyber and physical content security •

Tax credits evolution •

Raw material and other key input cost availability • and volatility

Physical security •

Products development and • cybersecurity

CORPORATE SOCIAL RESPONSIBILITY & COMPLIANCE

GLOBAL MARKET & INDUSTRY

FINANCIAL

Indebtedness •

Environment •

Develop relevant innovation •

Competition •

Interest rate and exchange rate fluctuations •

Health and safety •

Economics, political, and social conditions •

Liquidity •

Talent and Human Rights •

Impairment of assets •

Legal compliance •

Operational risks 3.1.1 GRI [102-15] PRODUCTION SERVICES Customer Project Management Risk description

available to Production Services to complete a project. For example. Production Services’ VFX businesses are dependent upon the client’s turnover of shots; any delay in turnover by the client reduces the amount of time Production Services has to complete them, which may then require additional resources and costs in order to maintain the production schedule. Risk management In Production Services, there are dedicated processes in place for risk assessment that are regularly updated throughout the execution of the projects to address any mitigating actions needed. As part of the bidding process, the allocation and planning of resources is reviewed by production management to ensure that the assessment is adequate to deliver the project plus the allocation of a contingency. During production, robust monitoring of projects, including regular cost-to-complete financial reviews, is established to ensure that work-in-progress is in line with budgets initially approved, as well as anticipate any deviations in terms of resources, quality and delivery timing. Progress reports and management indicators are built to support this monitoring process.

Projects in the Production Services Division vary greatly in size, with several large projects that can last 12 – 18 months and numerous small ones that require much quicker turnarounds. The difficulty resides in the proper allocation of resources to deliver a production on time and on budget, mitigating gaps between projects, and managing changes by clients in their production schedules and release dates. The projects can also be executed across multiple geographies and time zones, which may create challenges for the management of such projects. If a project consumes more resources than initially planned, it may lead to cost overruns that may be difficult to recover from our customers, especially as much of Production Services’ business operates under fixed-price contracts. Dependencies may also exist with the customer and/or other service providers of the customer that can negatively impact the time

44

TECHNICOLOR REGISTRATION DOCUMENT 2018