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RISK FACTORS
5
RISKS LINKED TO THE ACTIVITY
5.2
RISKS LINKED TO THE ACTIVITY
Type
Impact
Risk reduction measures
Risk that fixed-price
contracts may lead to
excess non-billable hours.
Negative impact
on revenue and
gross margin,
and
ultimately,
on operating profit.
Contract review process (conducted monthly within the different Business
Units and
subsidiaries abroad,
and quarterly at Group level, with the involvement of the CFO and the Executive Vice-President in charge
of HR Development for contracts representing revenue in excess of a threshold adapted to the activity
and size of the said Business Units and subsidiaries or that have certain inherent risk factors, such as a large
number of hours, a multi-year period, the technology used, etc.).
These contract reviews are used to assess the progress of projects under way and all the identified risks
in order to define and implement appropriate action plans (both for customers and in-house).
The Group’s project management process is widely
publicised and
rigorously formalised with a view to
ensuring that project-related risk management is deeply embedded in the Group’s culture. In this respect,
the Group’s Project Management
Handbook is regularly
updated and distributed to all project management
players within the organisation. Ad hoc training is organised and specific audits are conducted on a
selection of projects covering all of the Group’s areas of business.
Risk that business
activities engaged in with
one or more major clients
may decline or cease
altogether.
Negative impact
on revenue and
operating profit.
The business conducted with the Group’s ten leading clients involves varied skills in diverse business sectors,
which consequently significantly curbs the potential impact in terms of dependence. The Group’s strong
position with its clients (notably as their top-ranking provider) considerably reduces this risk by ensuring
its business volumes in the medium and long term.
In addition, the use of subcontracting and the implementation of training courses with a view to
redeveloping skills also enable changes in workloads to be managed.
Risk that the operational
non-billing rate
(the TNFO) exceeds
the threshold of 10%.
Negative impact
on operating profit.
As a key operating indicator for the Group, the TNFO is included in the periodic reporting reviewed
by members of the management team. If the TNFO diverges from the established threshold, members
of the management team take the appropriate decisions, notably in terms of interoperability of resources,
in order to lower the TNFO within a very short time span.
TNFO is determined as follows:
Total unbilled hours of billable staff/Total hours worked by billable staff.
Risk that net staff
turnover is not effectively
managed and that the
turnover rate is such
that the replacement
of resources cannot
be ensured during the
period.
Negative impact on
project performance
and revenue.
Staff turnover management is placed under the ultimate responsibility of the Group’s Executive Vice-President
in charge of HR Development. Annual recruitment plans are established on the basis of a turnover rate
of 20 to 25% and changes in the rate during the period are regularly measured, analysed and monitored.
The Group maintains a close-knit relationship with several engineering schools in France and abroad
(particularly by taking part in school-company forums), which gives it access to a substantial pool of skills
and resources.
Staff turnover is measured as follows:
Staff departures during the year/Average headcount during the year.
Risk that clients may
relocate their business or
projects to areas where
the Group does not
operate.
Negative impact on
revenue, on continued
relationships with
clients, and on
operating profit.
The Group strives to emphasise its ability to provide its services in the geographic areas in which clients
may choose to locate their business.
The Group already has two engineering centres serving business relocations, one in Romania, and the
other in India. Clients in the automotive sector who operate part of their business in Romania, are already
supported by Assystem for projects and operations conducted in that country. In the Aeronautics sector,
the service level agreement renewed in 2015 with a major client comprises increased use of the Indian
production base, due to be gradually implemented.
With regard to development in the Asia-Middle East-Africa region, in 2013 we installed the Executive
Management Department for the Group’s Energy & Infrastructure division in Dubai. Supplementary
development actions began in this zone in 2014 and continued in 2015, in particular via the acquisition
of the Saudi company Radicon, which has a higher operating profitability level than the average level
observed for the Group as a whole. The Group is gradually covering the development costs of the activity
generated in the area through the operating profitability achieved in the contracts entered into, thanks to a
combination of the effects of its local presence and its global skills (including by Radicon, in synergy with
the rest of the Group).
The risk that contracts
entered into do not
generate sufficient
margins to cover
the development costs
in geographical areas
where the Group has little
or no presence.
Negative impact
on operating profit.
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ASSYSTEM
FINANCIAL REPORT
2015