TELEPERFORMANCE_Registration_document_2017

CONSOLIDATED FINANCIAL STATEMENTS

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7.6 Notes to the consolidated financial statements

Credit risk is continuously monitored by the Group’s Finance Department, through monthly reports and quarterly Executive Committee meetings. The Group does not require specific credit guarantees for its customer and other receivables. The Group determines the level of its impairment losses by estimating losses incurred on customer and other receivables. Guarantees The Group provides contract performance guarantees at the request of some customers. The guarantees provided are disclosed in notebI.4 Commitments and other contractual obligations . G.7.2 Liquidity risk Liquidity risk is the risk that the Group would experience difficulty in repaying its liabilities at the due date. The policy of the Group in respect of its financing is to maintain at all times sufficient liquidity to finance Group assets, short-term cash requirements, and its development, both in terms of amount and duration, and at the lowest possible cost. Over recent years, the Group has implemented a centralized cash management policy when in conformity with local legislation applying to its subsidiaries. Cash pool member companies represent slightly over 60% of Group revenues. In those countries where cash-pooling is not permitted, short- term cash management is provided by subsidiaries’ operational management which generally has access to short-term bank facilities, plus, in some cases, confirmed credit line facilities from the parent company. All medium- and long-term financing operations are authorized and overseen by the Group’s Finance Department. The Group obtains its financing in the form of loans, credit lines and bond issues with high-grade financial institutions, with maturities ranging from 2018bthrough 2026bas disclosed in notebG.4 Financial liabilities . The outstanding balance available on the multi-currency (€, US$) syndicated facility as of December 31 st , 2017bamounted to €300bmillion. Net debt at December 31 st , 2017bwas €1,326.3bmillion, compared with €1,666.8bmillion at the end of 2016. Given the maturities of our borrowings and the Group’s capacity to generate free cash flow, liquidity risk is considered to be low. Additional disclosures relating to liquidity risk are set out in notebG.4 Financial liabilities. G.7.3 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and the cost of equity instruments, will affect the Group’s results or the value of its financial instruments. The objective of managing market risk is to manage and control the market risk exposure, keeping it within acceptable limits, while optimizing returns.

Foreign exchange risk The Group is exposed in particular to foreign exchange risk on revenues denominated in a currency, generally the US dollar, which is not the functional currency of the Group company concerned. The Group hedges this risk mainly in respect of rate changes between the Mexican, Philippines and Colombian pesos, and the US dollar. Additional disclosures on these hedging operations are given in notebG.5 Currency hedging operations . The Group is also exposed to exchange risk on loans denominated in currencies other than the euro or the functional currencies of Group entities. Group policy is as follows: ■ the Group hedges loans made to subsidiaries with loans or advances in the same currency and with the same maturities, or with foreign exchange contracts; ■ the principal bank loans of Group companies are denominated in the functional currency of the borrower; ■ interest due on borrowings is denominated in the same currency as the cash flows generated by the underlying operations of the Group, primarily the euro, the US dollar and the £ sterling. This provides an economic hedge without resorting to the use of derivatives. Finally, the Group is exposed to foreign exchange risk when translating foreign subsidiaries’ financial statements for consolidation purposes. The translation effect on the consolidated revenues of the Group is disclosed in notebG.8 Exposure to exchange risk from translation of foreign subsidiaries’ financial statements on consolidation which shows the breakdown of revenues by currency over the last two years. The impact of changing foreign exchange rates on the Group’s revenues, profit before tax and net profit - Group share is disclosed in notebG.8 Exposure to exchange risk from translation of foreign subsidiaries’ financial statements on consolidation . Interest rate risk See notebG.4 Financial liabilities. G.7.4 Equity risk The Group limits its exposure to equity risk by investing available cash reserves in short-term liquid investments, certificates of deposit, and in low risk financial instruments such as mutual funds, while choosing high-grade financial institutions and avoiding significant concentration. Group management does not expect any counterparty to default. Short-term liquid investments at December 31 st , 2017bamounted to €31.8bmillion, principally represented by money market or mutual funds. Share capital and equity management The Group’s policy on share capital and equity management is to maintain a strong equity base so as to keep the confidence

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Teleperformance bb - bb Registration documentbb 2017