Cap Gemini - Registration Document 2016

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PRESENTATION OF THE GROUP AND ITS ACTIVITIES

1.7 Risk analysis

Interest rate risk

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 ◗ functional currency is not the euro are also generally hedged. fees flows payable to Cap Gemini by subsidiaries whose ◗

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 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 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 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). 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 ◗ 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; Foreign currency risk Risk factors

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 The main factors of volatility risk are fluctuations in interest rates and more generally in the financial markets, as well as inflation 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 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 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 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. Risk management systems

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Registration Document 2016 — Capgemini