technicolor - 2020 Universal Registration Document

3 RISKS, LITIGATION, AND CONTROLS RISK FACTORS

Operational risks 3.1.2 GRI [102-15]

PRODUCTION SERVICES

CUSTOMER PROJECT MANAGEMENT

Risk identification

Risk monitoring and management

Projects in the Production Services Division vary greatly in size, with several large projects that can last 12-18 months and numerous small ones that require much quicker turnarounds. The difficulty resides in the proper allocation of resources to deliver a production on time and on budget, mitigating gaps between projects, and managing changes by clients in production scope, production schedules and release dates. The projects can also be executed across multiple geographies and time zones, which may create challenges for the management of such projects. If a project consumes more resources than initially planned, it may lead to cost overruns that may be difficult to recover from our customers, especially given that much of Production Services’ business operates under fixed-price contracts. Dependencies may also exist with the customer and/or other service providers of the customer that can negatively impact the time available for Production Services to complete a project. For example, Production Services’ VFX businesses are dependent upon the client’s turnover of shots; any delay in turnover by the client reduces the amount of time Production Services has to complete them, which may then require additional resources and costs in order to maintain the production schedule.

In Production Services, there are dedicated processes in place for risk assessment that are regularly updated throughout the execution of the projects to address any mitigating actions needed. As part of the bidding process, the allocation and planning of resources is reviewed by production management to ensure that the assessment is adequate to deliver the project plus the allocation of a contingency. During production, robust monitoring of projects, including regular cost-to-complete financial reviews, is established to ensure that work-in-progress is in line with budgets initially approved, as well as anticipate any deviations in terms of resources, quality and delivery timing. Progress reports and management indicators are built to support this monitoring process. To ensure that quality of services is in line with customers’ expectations, initial tests and intermediary deliveries are scheduled with customers. The division also uses workflow management tools which help to coordinate reviews and deliveries with third parties and limit the dependencies risks. Further mitigating client dependencies, with fixed bid awards, contracts have well-structured change order provisions to allow for the negotiation of award increases or decreases if a client materially changes the project scope or scale or for creative retakes. With a network of production studios across the globe, Production Services also has the scale and technology to optimize resource allocation and utilization if a specific project requires additional resources that were not previously anticipated or if a client changes its production schedule and/or release date for the project.

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TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2020