technicolor - 2020 Universal Registration Document

3 RISKS, LITIGATION, AND CONTROLS RISK FACTORS

Ý

ECONOMIC, POLITICAL & SOCIAL ENVIRONMENT

GRI [103-1 Economic performance] [103-2 Economic performance] Risk identification The ongoing Covid-19 pandemic has resulted in a deterioration in the macroeconomic environment adversely affecting consumer confidence, disposable income and spending, and resulting in decreased volumes for some of the Group’s products and services. For example, Technicolor is well established in Latin America through the Connected Home segment, and the economic uncertainties in this area may negatively impact its revenue and results. The pandemic has also severely impacted the theatrical exhibition market. Sustained cinema closures and/or capacity constraints will continue to impact the timing of new releases, which may negatively impact the revenue and results of DVD Services and Production Services. Also, Technicolor has installed its main Production Services activities in certain locations attractive to its customers, for production related tax incentives as an example. Any material change to the incentive programs available in such locations may impact significantly the decisions by customers on where they outsource production services like VFX and Animation. Furthermore, weakness in general economic conditions may result in an increasing number of the Group’s customers becoming delinquent on their obligations to the Group or being unable to pay, which in turn could result in a higher level of receivables write-offs. Any prolonged global economic downturn may therefore have adverse effects on the Group’s operating results or financial condition. The exit of the United Kingdom from the European Union may also have negative impacts on the Group performance. For example, there is potential risk to Production Services’ operations from any delays in talent mobility, whether from hiring and bringing talent into the United Kingdom or securing visas for U.K. talent to work in the European Union. Similarly, Connected Home and DVD Services may experience delays in deliveries and/or new cross-border cost impacts.

Risk monitoring and management

The Group’s presence in geographically diversified markets makes it less sensitive to adverse economic conditions in a given market; particularly during a global pandemic where certain key markets have returned to relative normalcy more quickly than others. Risks concerning the regulatory, political and social environment are managed by each business and at the Group level by the Strategy Committee, either in a decentralized form for risks specific to a given activity, or through support functions. They are regularly reviewed in detail by Group Management as part of the Monthly or Quarterly Business Review meetings. Specific to Covid-19, the Group established a Covid task force that immediately prepared and circulated a Covid-19 playbook and continues to convene weekly to ensure best practices and compliance with local regulations. Regarding the impact of general economic conditions on customers, the Group’s Finance department has longstanding policies in place for regular monitoring of debtors and credit checks on new clients and the Group continues to closely monitor Brexit risk on its operations. Connected Home is evaluating options to mitigate any logistics and customs delays, including the use of outside brokers to alleviate administrative burdens and delays. DVD Services has been proactive in its prior verbal and written communications with customers on Brexit. DVD Services did not experience any negative impact in 2020 related to Brexit, and will continue to monitor the situation as volume and activity picks up in 2021. Production Services remains in constant communications with immigration counsel and Human Resources to stay abreast of the latest regulations impacting talent mobility across borders. Today, Technicolor considers Brexit a relatively shorter-term risk during this transitional period.

48

TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2020