TELEPERFORMANCE_Registration_document_2017

RISKS AND CONTROL

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2.1 Risk factors

■ the principal bank loans granted to 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, US dollar and pound sterling. This provides an economic hedge without resorting to derivatives. Finally, the Group is exposed to foreign exchange risk when translating foreign subsidiaries’ financial statements for consolidation purposes. The translation difference on Group consolidated revenue is disclosed in notebG.8 ( Exposure to exchange risk due to consolidation ) of the consolidated financial statements, which shows the breakdown of revenue by currency over the last twobyears. The impact of changing foreign exchange rates on the Group’s revenue, profit before tax and net profit Group share are disclosed in notebG.8 (Exposure to exchange risk due to consolidation) .

Foreign exchange risk

Risk identification The Group is particularly exposed to foreign exchange risk on revenues denominated in a currency other than each company’s functional currency, i.e . principally the US dollar. Risk management The Group hedges currency risk on sales, notably between the Mexican, Philippine and Colombian peso and the US dollar. These hedges are more fully described in notebG.5 ( Currency hedging operations ) of the consolidated financial statements. The Group is also exposed to currency risk on its borrowings denominated in currencies other than the euro or the functional currency of Group companies. Group policy is as follows: ■ the Group hedges loans granted to subsidiaries with loans or advances in the same currency and with the same maturities, or with foreign exchange contracts if market conditions allow;

Sensitivity to interest rate changes

Risk identification The Group is exposed to interest rate risk on its financial liabilities and cash holdings.

Risk management However, a significant portion of its debt is at fixed rates. Amounts subject to interest rate risk are as stated below:

Subject to interest rate risk

Subject to interest rate risk

12/31/2017

Net debt

Fixed rate

12/31/2016

Fixed rate

Total financial liabilities

1,611

1,179

432 -285 147

1,949

619

1,330

Total cash and cash equivalents

-285

b

-282

b

-282

NET DEBT

1,326

1,179

1,667

619

1,048

A 100bbp movement in interest rates would have a €3.3bmillion impact on 2017bearnings and €9.2bmillion on 2016bearnings.

2.1.3.4 Equity risk Risk identification and management

business development. The Group pays close attention to its net debt and debt-to-equity ratio. The debt-to-equity ratio is as follows:

The Group limits its exposure to equity risk by investing available cash reserves in short-term liquid investments, certificates of deposit, and low risk financial instruments such as mutual funds, while choosing top-tier financial institutions and avoiding significant concentration. Group management does not expect any counterparty to default. Short-term liquid investments at Decemberb31 st , 2017bamounted to €31.8bmillion, principally represented by money market funds and 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 of investors, creditors and the market, and to support future

12/31/2017

(in millions of euros)

12/31/2016

Net debt

1,326 1,922

1,667 1,922

Total shareholders’ equity DEBT-TO-EQUITY RATIO

0.69

0.87

From time to time the Group buys back its own shares on the market. Oddo Corporate Finance has acted on its behalf under a liquidity agreement since Januaryb8 th , 2007. The agreement complies with the Code of Conduct established by the AFEI (French Association of Investment Firms) as approved by the AMF. The amount of funds committed to this arrangement is €3.0bmillion at Decemberb31 st , 2017. The number of treasury shares held at the end of the year is set out in notebF.1 ( Share capital ) of the consolidated financial statements.

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Teleperformance bb - bb Registration documentbb 2017