Econocom - 2019 Universal registration document

04 risk factors regulatory risk

Regulatory risk 2. Legal risks 2.1. The Group operates as a service provider in various Western European countries and is therefore subject to numerous different laws as well as customs, tax and labour regulations. In order to limit its exposure to legal risks, the Group has set up subsidiaries in each country run by managers who are familiar with the applicable local laws and regulations, who work alongside the Group’s Legal Counsels and external consultants. Econocom monitors on an ongoing basis any litigation and one-off situations that could result in a financial risk. Any pending litigation is covered by provisions for appropriate amounts calculated by Group Management. Disclosures concerning litigation or arbitration likely to have a substantial impact on Econocom group’s financial position, assets, business or the results of its operations at 31 ژ December 2018, are presented in note 16 to the consolidated financial statements. Risks associated with 2.2. tax inspections The Group undergoes regular tax inspections in the various countries in which it operates. Although the outcome of these inspections is uncertain, the Group has estimated as accurately as possible the associated risks and has recognised the appropriate provisions for those risks in its financial statements. The outcome of these inspections could have a negative impact on the Group’s consolidated financial statements. However, this impact is limited on account of the provisions recognised. Risks associated with 2.3. regulations applicable to lessors’ leasing business Certain countries have decoded to implement stricter legislation for leasing companies by aligning it with the

legislation governing financial institutions. The associated risk, which is common to all companies in the industry, concerns the increase in administrative costs. Risks associated with 2.4. regulations applicable to Technology Management & Financing clients The new IFRS standard applicable to lease agreements, IFRS 16, published in January ژ 2016, entered into force on 1 ژ January 2019. Under this new accounting standard, “lease liabilities” are presented on the Company’s statement of financial position under liabilities, with the exception of small items with an insignificant unit value. As anticipated, the impact of this new standard for the Technology Management & Financing business was limited due to the added value brought by the Group in its leases: upgrade management via leasing and in • particular the Group’s scalable offerings; asset management and expense • management provided by Econocom’s solutions (inventory tracking, telephone usage management, IT outsourcing for small and medium businesses, etc.), which give our clients optimal visibility and more effective management of their assets; better economic management of • end-of-life assets; management of end-of-life assets in greater • compliance with sustainable development commitments; smart and connected object (IoT) • management capabilities.

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2019 annual report