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PRESENTATION OF THE GROUP AND ITS ACTIVITIES
1.7 Risk analysis
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Registration Document 2016 — Capgemini
Interest rate risk
Risk factors
risk if unfavorable movements in interest rates had a negative
impact on future net finance costs and financial flows of the
Group.
The Group’s Income Statement could be impacted by interest rate
Note 23 to Capgemini’s financial statements).
is generally invested at floating rates, while the Group’s debt -
primarily comprising bond issues - is mainly at fixed rates (see
considered in light of its cash position. The liquidity at its disposal
The Group’s exposure to interest rate risk must also be
Risk management systems
As part of its financing policy, the Group seeks to restrict interest
rate risk by opting for fixed rates for a large part of its debt.
differential).
The Group favors investments offering a high level of security and
generally floating-rates and as such accepts - in the event of a fall
in interest rates - the risk of a drop in returns from the investment
of cash surpluses (and as such an increase in the finance cost
Foreign currency risk
Risk factors
euro, and currency risks arising on operating and financial cash
flows which are not denominated in the entities’ functional
currency.
The Group is exposed to two types of currency risks that could
impact earnings and equity: risks arising in connection with the
consolidation process on the translation of the accounts of
consolidated subsidiaries whose functional currency is not the
inter-company financing transactions and fees paid to the Group
by subsidiaries whose functional currency is not the euro (see
Note 23 to Capgemini’s consolidated financial statements).
The growing use of offshore production centers in India, but also
in Poland and Latin America, exposes Capgemini to currency risk
with respect to some of its production costs. Cap Gemini S.A. is
also exposed to the risk of exchange rate fluctuations in respect of
Risk management systems
The Group implements a policy aimed at mitigating and managing
foreign currency risk:
production cost risks primarily concern internal flows with India
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and Poland; a hedging policy is defined by the Group and its
implementation which is mainly centralized at Cap Gemini level
primarily involves forward purchases and sales of currency;
activities are primarily centralized within Cap Gemini and are
mainly hedged (primarily using forward purchases and sales of
currency);
financial flows exchanged as part of inter-company financing
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functional currency is not the euro are also generally hedged.
fees flows payable to Cap Gemini by subsidiaries whose
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Risks relating to employee liabilities
Risk factors
make-up pension fund shortfalls, over a short or long time period,
potentially deteriorating its financial position.
Capgemini’s consolidated financial statements could be impacted
by provisions for pensions and other post-employment benefits
related to defined benefit plans, which are subject to volatility.
Furthermore, the Group could be faced with calls for funds to
rates and life expectancy. The value of pension obligations is
calculated based on actuarial assumptions and particularly interest
rates, inflation rates and life expectancy.
The main factors of volatility risk are fluctuations in interest rates
and more generally in the financial markets, as well as inflation
funding shortfall or deficit. Changes over time in assets and/or
liabilities are not necessarily in the same direction and are
eminently volatile and can increase or decrease the funding
asset/liability or the resulting deficit. Nonetheless, the potential
economic impact of these changes must be assessed over the
mid- and long-term in line with the timeframe of the Group’s
pension and other post-employment benefit commitments (see
Note 24 to Capgemini’s consolidated financial statements).
management policy defined by the trustees, implementation of
which can in certain cases by delegated. Under these conditions,
plan assets may be less than pension obligations, reflecting a
The plan assets of schemes whose risks have not been
transferred to the insurance market are managed by the trustees
of each fund and invested in different asset classes (including
equities). They are subject to market risk, the performance of the
Risk management systems
main pension funds, encompassing the management of assets
and liabilities, is reviewed and monitored periodically with the aim
of reducing volatility. Increased life expectancy is taken into
account as and when it is recognized by actuaries.
resources of its main pension funds. The investment strategy of its
The Group strives to strengthen the governance and management
Group commitments to fund pension and other post-employment
benefit shortfalls comply with local regulations.
Certain risks are transferred to the insurance market.