BIC - 2018 Registration document

RISKS

Operational and financial risks

Financial and market risks/Counterparty risk

Risk Identification

Risk Mitigation

The BIC Group, through its foreign exchange, financing and investment hedging activities, is exposed to a financial counterparty risk on its positions recognized as assets in the consolidated balance sheet (fair value of financial instruments and cash invested with financial institutions).

All financial instruments are set up with banks with first-class ratings by international agencies and therefore the counterparty risk very low. The minimum Standard & Poor’s long-term rating of our main banking counterparties is A-. The rating range goes from A+ to A-. It should nevertheless be noted that the rating is one of the elements that contribute to our understanding of counterparty risk but cannot be our only decision-making criteria. Counterparty risk is calculated in accordance with IFRS 13 at each half-yearly closing, and to date the result has never been considered significant enough to be subject to a specific accounting entry. Decisions to invest cash surpluses are subject to a rigorous counterparty risk assessment (of subscribed assets, depositaries and custodians). Counterparty risk is considered immaterial as of December 31, 2018. The BIC Group manages its liquidity in order to maintain a positive and available cash position to successfully execute its organic development and/or external growth strategy. While the BIC Group does not currently have significant structural bank financing, the Group Treasury regularly checks the borrowing capacities available from its core banks. The Group’s surpluses and cash requirements are managed by Group Treasury, following a prudent policy, which aims to avoid any risk of loss on capital and to maintain a satisfactory liquidity situation. Surpluses located in non-centralized countries, Brazil and India in particular, are subject to the same policy, under the decision-making control of Group Treasury. The more structural portion of the cash can be invested in financial instruments with an investment horizon of more than six months. All investment lines are monitored on a bimonthly mark-to-market basis by Group Treasury and aim to maintain an average annual performance above the capitalized Eonia rate. Group Treasury is also in constant contact with asset management companies, in order to have the best possible level of information on asset managers’ decisions and to gain the best possible understanding of the impact of market movements on the valuation of the funds held. Risk Mitigation

Financial and market risks/Liquidity risk

Risk Identification

In order to finance its investments and other cash requirements, the BIC Group must ensure access to financing resources available both internally within the BIC Group and externally from financial institutions.

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• BIC GROUP - 2018 REGISTRATION DOCUMENT •