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RISK FACTORS
5
RISKS RELATED TO THE ECONOMIC ENVIRONMENT
Assystem conducts its business in a constantly-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.
This Chapter sets out the risk factors to which the Group could be
exposed, including risks relating to the economic environment,
operational risks, legal risks and financial risks. The Group considers
that there are no significant risks to which it is exposed other than those
described below.
For each risk factor covered, details are given about its type and impact
as well as the risk reduction measures put in place.
See Chapter 8.1 of this Registration Document for a description of the
Group’s risk identification and management procedures.
5.1
RISKS RELATED TO THE ECONOMIC ENVIRONMENT
Type
Impact
Risk reduction measures
Risk of political, social and economic
instability in the geographic areas in which
the Group operates (particularly Turkey,
Saudi Arabia, Nigeria and Yemen).
Risk of volatility
in revenue and
operating profit.
In view of the proportion of the Group’s revenue and operating profit generated
in these geographic areas this risk exposure is low.
Risk that the markets and geographic areas
in which the Group operates may have
a dilutive effect on 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.
Risk that contracts entered into do not
generate sufficient margins.
Negative impact
on gross margin
and, ultimately,
on operating profit.
Specific process for selecting projects and submitting bids (financial review of key project
elements, in particular projected revenue and margins and margin on completion
for fixed-price projects) and authorisation by designated managers.
Contract review process (conducted monthly within the various 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 Business Units and subsidiaries,
or that inherently involve certain risk factors, such as a large number of hours, a multi-year
period, type of technology used, etc.
Risk of non-recovery of trade receivables.
Negative impact
on realisable and
available assets and
on operating profit.
Client creditworthiness investigations conducted when new contracts are taken on,
and regularly re-conducted 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.
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.
Procedure drawn up 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 signature by one or even two members of the management
team for capital expenditure in excess of a given threshold. Capital expenditure
(i.e. investments excluding external growth) represents just over 1% of the Group’s
consolidated revenue, which is normal in Assystem’s industry, and means that exposure
to risks related to this expenditure is limited.
Investments relating to the acquisition of equity investments and to 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 staff.
ASSYSTEM
REGISTRATION DOCUMENT
2016
72