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RISK FACTORS
5
RISKS RELATED TO THE ECONOMIC ENVIRONMENT
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.
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.
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.
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.
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.).
Risk of (partial or total)
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 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.
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 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.
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ASSYSTEM
FINANCIAL REPORT
2015