QUADIENT - 2020 Universal Registration Document

4 RISK FACTORS AND INTERNAL CONTROL Risk factors

The table below gives a precise description and dedicated action plan for each of the six risk categories and the way these risks are mitigated.

STRATEGIC RISKS

Risks

Risk management system

High Risks COVID-19 crisis and global recession

COVID-19 crisis started in China in December 2019. It has spread to Italy since the beginning of February 2020 and then in other European countries, in North America and in South America. Containment measures have been taken in most countries and business and production activities are widely impacted but differently depending on the country. Risk related to COVID-19 are rated in the graph above.

Since beginning of February 2020, business continuity committees have been created in each regions and in each production sites. A weekly ExCom meeting was also dedicated to COVID-19. Quadient has demonstrated its capacity to run operations in the most efficient way during this period.

Five major risks have been identified: Risk on employees and human capital ●

Risk on employees and human capital. ●

COVID-19 represents a risk on human capital. Health and safety of the Group’s employees and works conditions allowing the maximum of security are key.

Since beginning of February 2020, measures have been ● taken: communication: health and safety preventive measures; - preparation of home office and trainings on different - applications; travel: travel ban on international flights except for - imperious reasons, business trip reduction, cancellation or postponement of meetings or events. Since March 2020: ● home office for all employees if possible; - repatriation of employees. no more internal or external - face to face meetings; very limited number of on site service visit during - containment period. On site service visit have been reduced to the minimum during containment period and organized in the most safer way for the Group’s employees and customers. Meanwhile call centres have been prepared and equipped for home office. Service continuity has been set up and is in line with preventive measures. Home office for sales people and service business continuity during containment period have been established very quickly and as a consequence all measures have been taken to reduce the impact on revenue. The percentage of recurring revenue is also key to assess risk on revenue. Thanks to actions taken, sales decreased by 7,3 in a contained organic decline. Guidance has been revised from -10 to -8 in organic growth. The Group has performed a review of all variable costs that could be postponed (third parties, projects…). Action plan takes into account the level of the activity. Partial unemployment has been put in place. Guidance has also been revised with a better profitability than expected at the beginning of the fiscal year. Risk on service continuity for customer ● Risk on revenue ● Risk on profitability ●

Risk on service continuity for customer ●

The majority of regions where Quadient operates were subject to containment measures in 2020. Service continuity for customers must be organized and, in the meantime, the maximum of security must be applied for the employees.

Risk on revenue

●

Containment of populations in main regions during certain period may lead to a reduction of the activity. Quadient could be exposed on its non-recurring revenue: hardware and license sales. On the opposite, this crisis may create opportunities in terms of revenue, especially for the Group's digitalization solutions.

Risk on profitability

●

Risk on revenue could have an impact on the level of profitability. The impact depends on the magnitude of the decline and on the actions taken to adapt cost structure.

88

UNIVERSAL REGISTRATION DOCUMENT 2020