Assystem - Registration Document 2016

5

RISK FACTORS

RISKS RELATED TO THE ECONOMIC ENVIRONMENT

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.

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

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 that the markets and geographic areas in which the Group operates may have a dilutive effect on margins.

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.

Erosion of gross margin and, ultimately, of operating profit. Negative impact on gross margin and, ultimately, on 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. 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. 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. 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.

Risk that contracts entered into do not generate sufficient margins.

Risk of non-recovery of trade receivables.

Negative impact on realisable and available assets and on operating profit.

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.

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ASSYSTEM

REGISTRATION DOCUMENT 2016