Eurazeo / 2019 Universal Registration Document
Risk management Risk factors
Conflicts of interest 4.2.2.3
MODERATE Risk that Eurazeoactivities inoneor several ofits investmentstrategies createconflicts ofinterest, particularly between theCompany’s interests and those of investmentpartners, between its investmentfunds,or evenbetweeninvestmentpartners, whicharelikelytoultimately harm theinterests of theirclientsand investmentpartners. Considering the diversification of its investment and third-party management developmentstrategies,Eurazeo islikely tobe increasinglyexposed to conflicts of interestbetweenits own interests, those of the fundswhich it manages, those ofinvestmentpartnersand thoseof its employees. Proper management of these risksis vitalto ensurethe effectivecohabitation of its equityinvestment and investmentpartner management strategies. From the qualification of an investment opportunity by oneof the differentstrategies to the portfolio company’s operations(particularlyacquisition, build-ups, divestment, etc.), Eurazeo teams might be led to make decisions likely to put the Company in situations whereits own interestsmight potentially compete with investment partner interests. As an example, conflicts of interestcanbe found in the following situations: co-existence ofseveral investment strategies which are stakeholders in a given investment project,ypicallyprivateequityandprivatedebt • activities; co-investment betweenmanaged vehicles; • types offees billed to funds; • transfer ofportfolio companies betweenfunds; • To ensurethe interestsof investment partners always takeprecedence, Eurazeo has drafteda conflict ofinterest management policyfounded on threepillars:prevention,detectionandmanagementof conflicts ofinterest. The risks associated with potentialor proven conflicts of interesthave beenmapped.A risk prevention andmanagementprocedurehas beendefinedfor eachrisk. The key components of this procedureare: transparency with investment partners, independenceof the Eurazeo subsidiary management companyteams,strictrulesdefining bans on information sharing betweenteams,adaptation ofgovernanceprinciplesfor managed funds. Potentialeffects Disputeswith investment partners, likely to resultin Eurazeo’s • responsibilitybeing invoked Change in Eurazeo’s reputation, limiting its ability to fundraise in the • future Examples of risk mitigation measures Conflict ofinterest management procedureandpolicy • Very differentassetallocation policy/investment strategies • Alignment ofinterests:teamco-investment system • allocation/qualification of an opportunity byan investment strategy; • decision on a suitable portfolio companydivestment schedule; • additional investment in a portfolio company. • MODERATE Risk that climatechange has negative effects on certain Eurazeoportfolio companies, notably (i)the physicalintegrity and operation of sites, (ii) the resilience of theirmodel or(iii)theirabilityto preventenvironmental damage. Depending on the location and natureof the activity,the impactsof climatechangemaybe identifiedas material anda sourceof financialrisk. The potential impactsmaytouch production, the health andsafetyof employees, operating costsor insurance: directphysicalrisks in the short-term( e.g. floods resulting in damage or an activity shut-down) or the longer term(long-termsuccess, • quality of access to and supplyof critical resources: rawmaterials, wateror energy; relocation of the businessdue torising sea levels,etc.); transition risks: the company’s ability to adapt to the effects of climatechange depending on the resilience ofits activity(inabilityto replace • potentially scarcematerials, total or partial banon activityor the useof rawmaterials,change in customer behavior), its industrial model (inability to adapt the production and istribution tool to regulatory, energy or supply chain constraints) or its business model (the company’s inability to maintain a certain level ofeconomic performance ifdealingwithsomeor all ofthe risks mentioned above). As part ofits CSR strategy, Eurazeo performs CSRdue diligence on 100% of prospectiveacquisitionsundergoing advanced review (see portfolio company support in terms of CSR andrisk management linkedto climatechange on page75). Potentialeffects Climate change 4.2.2.4
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Examples of risk mitigation measures Acquisition due diligence on exposureto climatechange • Post-acquisition follow-up of action plans • KPI monitoring:compliance with the thresholds for air, • water andsoil emissions
Physical damageat sites which canno longeroperate • Environmental damage: reputation, legal proceedings • Unsustainable model in the long-term: (i) scarceand/orprotected • resources;(ii) industrial/businessmodeldisruption
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2019 UNIVERSAL REGISTRATION DOCUMENT
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