Exclusive Networks // Sustainability Report 2022

Risks and opportunities Risk factors

2.1

Risk factors

2.1.1

Strategic and market risks

Risk related to macroeconomic and political conditions

Criticality level: ■ ■ ■

Risk description

Risk management

Due to its global footprint, the Group is exposed to the risks of global macroeconomic instabilities and political tensions. International tensions (e.g. China-Taiwan relations, China-US tensions, and the Russian-Ukrainian conflict) may lead to a deterioration in the business climate and could result in increased trade barriers or international sanctions. This was the case in the trade war between the US and China on the one hand and the EU on the other. The sanctions adopted by the West against Russia could be broadened. Continued economic uncertainty in many countries, as well as instability in the emerging markets in which the Group operates, continue to fuel a tense global economic environment. In particular, the Group is impacted by freight costs downstream and upstream of the products it distributes. At the time of publication of the 2022 Universal Registration Document, the direct impact on the Group’s business of the conflict between Russia and Ukraine, and the related European, American and British sanctions, remains limited. The Group is not present in Russia, Belarus or Ukraine and has no significant revenue nor margin from those countries. Furthermore, none of its major vendors or partners are expecting a significant business disruption due to the conflict. The main area of concern for the Group remains the impact of the conflict on the economies of the Eastern European countries where the Group operates, in particular Poland, Romania and Hungary. The Group is nevertheless suffering from the backlash of a war situation and the inherent costs (inflationary pressure fuelled by soaring energy (about +7% to 9% over one year in the euro zone) and raw materials prices, higher cost of solutions offered to customers). These conditions may lead to adverse consequences for the Group such as reduced demand for cybersecurity solutions and services in general, increased competition, lower prices, loss of vendor rebates, extension of customer payment terms, increased bad debts, limited access to liquidity, increased currency volatility making hedging more expensive and difficult to obtain).

These critical or tense situations are the subject of action plans that are used to support decision-making with regard to the Group’s development. In this respect, to mitigate the impact of an unfavourable change in the economic or political situation of a country in which the Group operates, the Group has put in place the following measures:  the review by the Executive Committee of developments in the most exposed countries where the Group, its customers and vendors are present (see below, “Risk related to the supply of products and solutions distributed by the Group”);  monitoring at Executive Committee and operational level of existing tensions between China and the United States over Taiwan, in particular the additional restrictive measures taken by the United States with regard to China and the newly targeted entities and persons (see section 2.1.4 “Risks relating to export control regulations, sanctions regimes and embargoes concerning economic sanctions applicable to Dual-use products”) of this Chapter 2.

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Exclusive Networks

Sustainability Report 2022

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