Sopra Steria - 2018 Registration document

ADDITIONAL INFORMATION Disclosures arising from specific obligations – Other risks

2.2. Financial risks The Group’s Finance Department puts forward and oversees the application of rules concerning management of liquidity risk, market (foreign exchange, interest rate and equity) risk and associated counterparty risks. These risks are managed on a centralised basis at the level of the Sopra Steria Group parent company and financing, investment, risk identification and hedging strategies are reviewed regularly by the Finance Department. The Group’s policy is not to conduct speculative transactions on financial markets. Among

other tools, the Finance Department employs a cash management system that allows for the constant monitoring of the main liquidity indicators and of all hedging instruments used at Group level. The Finance Department receives regular reports on market developments and the risks to which the Group is exposed, together with information on hedging transactions and their valuation. Financial risk factors are presented in Note 11.5 to the consolidated financial statements in Chapter 4 of this document (pages 156 to 163).

2.2.1. LIQUIDITY RISK

Risk description

Risk management

The Group aims to ensure that it has ample access to liquidity to meet its commitments and its investment needs. To this end, the Group borrows from banks, but also raises funds from capital markets, and is thus exposed to liquidity risk in the event of insufficient lines of credit.

As the majority of the Group’s financing is carried by Sopra Steria Group, the implementation of financial policy is largely centralised. At 31 December 2018, the Group held €1.6 billion in credit lines, €950 million of which was not drawn down. The bank facilities renegotiated in 2016 were extended until 2023. Detailed information about credit facilities and their use is provided in Note 11.5.1 to the consolidated financial statements in Chapter 4 of this document (pages 156 to 159). Action taken to improve the management of the client payment cycle started to deliver benefits in 2018, leading to a structural uplift in the conversion rate of its earnings into cash flow.

2.2.2. FOREIGN EXCHANGE RISK

Risk description

Risk management

Foreign exchange risk is defined as the impact on the Group’s financial indicators of fluctuations in exchange rates relating to its business activities. The Group is exposed to transactional foreign exchange risk as well as translation foreign exchange risk. Due to the fact that the Group’s business activities are carried out in an international context, its entities may be exposed to the following types of foreign exchange risk: p foreign exchange risk relating to operations, which corresponds to changes in rates affecting transactions recorded in operating profit (currency flows relating to revenue or the cost of sales, etc.); p “financial” foreign exchange risk arising from financial liabilities (or financial assets) denominated in foreign currencies, with changes in their value affecting financial income and expenses; p foreign exchange risk related to investments in subsidiaries outside France, which arises on the translation of the subsidiary’s accounts into the consolidating entity’s presentation currency (impact on equity).

The Group Finance Department provides hedging on a centralised basis for such risks via futures or options entered into either on organised markets or over the counter with top- tier counterparties that are members of the banking syndicate, which provide financing to the Group. Management of foreign exchange risk is centralised with the main entities. In India, hedges are arranged locally under the supervision and control of the Group’s Finance Department. Exposure to the rupee is also being reduced through a policy of gradually repatriating cash held in India. For more information, see Note 11.5.4 to the consolidated financial statements in Chapter 4 of this document (pages 161 to 163).

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SOPRA STERIA REGISTRATION DOCUMENT 2018