NATIXIS_REGISTRATION_DOCUMENT_2017

RISKS AND CAPITAL ADEQUACY Summary of annual risks

greater than those forecast based on historical averages. Moreover, Natixis’ quantitative models do not incorporate all risks. Certainrisks are subjectto a more qualitativeanalysisthat could prove insufficient and thus expose Natixis to significant and unanticipated losses. In addition, while no material issue has been identified to date, the risk managementsystems are subjectto the risk of operationalfailure, includingfraud. The hedging strategies implemented by Natixis do not eliminate all risk of loss Natixiscould suffer losses if any of the instrumentsand hedging strategies it uses to hedge the various types of risk to which it is exposed prove ineffective. Many of these strategies are based on observationof historicalmarketbehaviorand historical correlationanalysis.For example,if Natixis holds a long position in an asset, it could hedge the risk by taking a short position in another asset whose past performancehas allowed it to offset the performanceof the long position. However,in some cases, Natixis may only be partially hedged, or its strategies may not fully hedge future risks or effectively reduce risk in all market configurations, or may even cause an increase in risks. Any unexpected change in the market can also reduce the effectiveness of these hedging strategies. In addition, the manner in which gains and losses resulting from certain ineffective hedges are recorded may increase the volatility of Natixis’reportedearnings. Natixis may encounter difficulties in identifying, executing and integrating its policy in relation to acquisitions or joint ventures Natixis may consider external growth or partnership opportunitiesfrom time to time. While Natixis closely reviews the companiesit plans to acquire and the joint ventures it plans to engage in, it is generallynot feasible for these reviews to be exhaustive.As a result, Natixismay have to assumeunforeseen liabilities. Similarly, the expected benefits of an acquisition or joint venturemay not be obtained,expectedsynergiesmay only be partly achieved(or not achievedat all), or the transactionmay give rise to higher-than-expected costs. Natixis may also encounter difficulties in consolidatinga new entity. The failure of an announced external growth operation or the failure to consolidatethe new entity or joint venture is likely to materially affect Natixis’ profitability. This situation could also lead to the departure of key employees. Insofar as Natixis may feel compelledto offer its employeesfinancial incentivesin order to retain them, this situation could also result in increased costs and an erosion of profitability. In the case of joint ventures, Natixis is subject to additional risks and uncertaintiesin that it may be dependent on systems, controls and personnel not under its control and which could subject Natixis to liability, losses or reputational damage. In addition, conflicts or disagreements between Natixis and its joint venture partners may underminethe benefitssoughtby the joint venture.

Natixis’ ability to attract and retain qualified employees is critical to the success of its business and failure to do so may significantly affect its performance Natixis’ employeesare one of its most importantresourcesand across the Financial Services industry, competition to attract qualified employees is intense. Natixis’ results depend on its ability to attract new employees and to retain and motivate existingemployees. Increased competition, both in Natixis’ home market of France, its largest market, and internationally, could adversely affect Natixis’ net revenues and profitability Natixis’ primary business lines contend with fierce competition in France and in other areas of the world where it is firmly established. Heightening this competition is consolidation, whether in the form of mergers and acquisitions or through alliances and cooperation.Consolidationhas created a number of firms that, like Natixis, have the ability to offer a wide range of products and services. Natixis competes with other entities on many levels, including transaction execution, products and services offered, innovation, reputation and price. If Natixis is unable to maintain its competitivenessin France or in its other major marketswith attractiveand profitableproductand service offerings, it may lose market share in important areas of its business or incur losses on some or on all of its operations.In addition, downturnsin the global economyor in the economies of Natixis’ major markets are likely to increase competitive pressure,as increasedprice pressure lowers businessvolumes for Natixis and its competitors. New and more competitive competitorscould also enter the market. Subject to separateor more flexible regulation, or to other requirements relating to prudentialratios, these new market participantsmay be able to offer more competitiveproductsand services. Technological advances and the growth of e-commerce have made it possible for non-bank institutionsto offer products and services that traditionally were banking products, and for financial institutions and other companies to provide electronic and Internet-based financial solutions, including electronic securities trading. These new players may exert downward price pressure on Natixis’ products and services and affect Natixis’ market share. In addition, new payment systems and currencies, such as bitcoin, and new technologies facilitating transaction processing, such as blockchain, have become increasinglycommon. It is difficult to predict the effects of the emergence of such new technologies, which face comparatively little regulation, but their increased use may reducethe marketshare of, or redirectamountsthat might have otherwise been invested in portfolios operated by, more establishedfinancialinstitutionssuch as Natixis.

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Natixis Registration Document 2017