BIC - 2018 Registration document

RISKS

Operational and financial risks

OPERATIONAL AND FINANCIAL RISKS 2.1.

FINANCIAL AND MARKET RISKS Financial and market risks/Foreign Exchange risk

Risk Identification

Risk Mitigation

Due to its international presence, BIC is exposed to currency fluctuations. Indeed, due to their commercial and industrial activities, Group entities may be subject to transaction risk related to purchases or sales transactions in currencies other than their functional currency. In addition, the financing requirements provided by intra-group loans expose certain entities to “financial exchange risk” (risk related to changes in the value of financial debt or receivables denominated in currencies other than the functional currency of the borrowing or lending entity).

The BIC Group actively manages its exposure to currency risk in order to reduce its sensitivity to adverse price fluctuations by setting up hedges in the form of forward purchases or sales and optional products. The Group’s main exposure remains the euro-U.S. dollar. During the 2018 financial year, the total hedging for commercial flows amounted to 309.7 million U.S. dollars. This exposure was hedged at the average rate of 1 EUR = 1.1269 USD. With regards to 2019 requirements, as of December 31, 2018, 100% of the identified exposure had been hedged on a firm or optional basis. The average price obtained for 2019 on hedges in place is 1 EUR = 1.1893 USD. For the BIC Group’s other significant exposures, the 2019 coverage ratio, as of closing date of December 31, 2018, is between 80% and 100%. All of the subsidiaries’ hedges are mainly with Société BIC, which in turn hedges the BIC Group’s net positions with external counterparties (first-tier banks). Note 21 to the consolidated financial statements, page 227, provides a detailed description of the underlying foreign exchange positions and the instruments used to hedge them. See also Note 23 to the consolidated financial statements, page 235.

Financial and market risks/Interest Rate Risk

Risk Identification

Risk Mitigation

For the purpose of its development and investment policy, the BIC Group may use bank or market financing. Interest rate risks results from the changes in interest rates, particularly in case of variable rate debt.

Exposure to interest rate risk is very limited. The occurrence of borrowing positions is not significant and is too specific to generate a need for a hedging. There are no interest rate risk management products in the portfolio as of December 31, 2018. See also Note 21 to the consolidated financial statements, page 227.

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• BIC GROUP - 2018 REGISTRATION DOCUMENT •