GECINA - REFERENCE DOCUMENT 2017

06

RISKS Risks

Risks

Change over the 2016-2017 period

CONTROL PROCESSES

MODERATE RISK LEVEL RISKS LINKED TO SUB-CONTRACTING

Risks of insolvency, poor performance or non-compliance with regulations by the main subcontractors, especially for construction/restructuring and maintenance works for the properties. Impacts: a decline in the quality of the services ■ provided by the Group; damage to the company’s image; ■ an increase in corresponding costs or ■ legal risks.

construction and renovation projects are ■ supervised by specialized and dedicated internal departments: Real estate programs and Technical Departments. These functions also use the services of external consultants (engineering, inspection firms, etc.) and, as appropriate, delegated project management; suppliers are listed so that they meet their legal ■ obligations, and sub-contracting is authorized only with Gecina’s explicit, prior approval; these procedures take into account all safety ■ regulations and obligations for compliance with labor laws; suppliers also sign the responsible purchasing ■ charter (chapter 7.6.4 “Responsible purchasing”); project suppliers are selected by reviewing ■ quotations or competitive bidding procedures on the basis of predefined thresholds; specifications and standard agreements binding on ■ suppliers are frequently updated to reflect regulatory obligations; payment deadlines for operating and site ■ contractors are shorter than regulatory deadlines; progress on works is subject to frequent ■ operational and budget checks. management of this risk is monitored by the ■ Insurance function, which reports to the Finance Department, with the assistance of an external broker-consultant; regular audits of the Group’s insurance programs ■ and renewal of competitive bidding procedures for brokers and insurers allow the Group to optimize its insurance coverage and costs; the policy categories are, moreover, distributed ■ among several brokers and insurers; the cost of insurance premiums paid by Gecina for ■ its compulsory and optional insurance coverage accounts for only a limited portion of its operating costs, and all of the Group’s assets are covered by insurance policies. the mechanisms for controlling acquisition and ■ liquidity risks, detailed above, specify the method for managing the risk component that could affect the investment and sale strategy; sales are carried out by dedicated teams acting in ■ collaboration with sales agents and/or external advisors; monitoring of sales transactions and reporting by ■ property; all real estate functions are internalized, ensuring ■ greater responsiveness in a competitive context; the process is completed by Asset Reviews. ■ RISKS LINKED TO COMPETITION

This risk is considered to be stable. It is the result of several components related to the economic context.

RISKS RELATED TO INSURANCE COST AND LACK OF COVERAGE FOR CERTAIN RISKS

Risks that the company may not be capable of maintaining the appropriate insurance covers at an acceptable cost, may not be covered for certain types of risks or may be confronted by the default risk of one of its insurers. Impacts: deterioration of the company’s ■ financial situation and earnings.

This risk is considered stable to date. For the year just ended, no significant insurance default was observed. Reorganization of the overall insurance policy conducted for several years now has allowed us to maintain a high hedging level at contained costs.

Risks of an obstacle to achieving the company’s strategy and non-achievement of the Group’s investment and sale strategy or rental management strategy, owing to competition. The Group competes against numerous national and international players. Some competitors have potentially larger financial resources, property holdings and acquisition and asset management capacities. Impacts: deterioration of rent levels or margins; ■ non-achievement of the strategy. ■

The risk is considered stable over the period. It exists within a context of high demand for real estate investments, which is, however, offset by a rental market showing signs of recovery in the city of Paris. As the leading real estate company in Europe in office property, Gecina maintains a definite competitive advantage through its positioning. Gecina is present in three segments of the real estate market (offices, traditional residential, and student residences).

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