Plastic Omnium - 2019 Universal Registration Document

2 RISK FACTORS AND CONTROL Main risk factors www.plasticomnium.com PLASTIC OMNIUM UNIVERSAL REGISTRATION DOCUMENT 2019 44 MAIN RISK FACTORS 2.1 Compagnie Plastic Omnium SE has reviewed the risks that could have a material adverse effect on its business, financial position, results or reputation. In accordance with regulations, only those risks that are both significant and specific to Compagnie Plastic Omnium SE, are described below. Risks considered as the most significant, with regard to the probability of occurrence and its impact (after taking into account the mitigation measures implemented by Compagnie Plastic Omnium SE) are identified by an asterisk. OPERATIONAL RISKS RISK RELATED TO AUTOMOTIVE PROGRAMS* Identification of risk Each automotive program has risks which could reduce its profitability from that initially expected. The risk relates particularly to programs that incorporate product innovations or which implement new industrial processes. This risk is increased for programs whose launch coincides with the start of a new plant. These uncertainties may require Compagnie Plastic Omnium SE to make higher levels of investment or expenditure than initially forecast in order to reach the rates and quality levels required by the customer. In addition, each automotive program is subject to risks in terms of manufacturing volumes, which depend on a wide range of factors, some of which are regional in nature, such as economic activity, carmaker production strategy, consumer access to credit and the regulatory environment, but also on factors specific to each vehicle, such as the attractiveness of its design. Ultimately, every automotive program is exposed to the risk of disruption of carmaker’s demand, of variable duration. This disruption can result from hazards specific to the carmaker (fire or natural disaster impacting one of its plants, work stoppage at a plant due to a strike, a pandemic, etc.). This disruption can also result from a similar hazard that would impact a supplier of components used in the manufacture of a vehicle, which could thus force the carmaker to permanently stop its production line for lack of components. Risk management Compagnie Plastic Omnium SE’s commitment to diversifying its businesses and increasing the number of automotive programs represents a key component of its strategic vision that significantly reduces exposure to geographic and other risks. Compagnie Plastic Omnium SE has 93 customer brands, comprising nearly all of the world’s major carmakers and serving different market segments and three distinct product families. It has continued to diversify its exposure to global automotive production markets with its businesses spread across 26 countries and with the launch of 243 new programs in production in 2019. In terms of commitments, all new projects are subject to a highly detailed approval process. The largest projects must be authorized by Compagnie Plastic Omnium SE’s senior management. Once a project has been accepted, a structured operational and financial monitoring system is set up to track it. RISK RELATED TO ACQUISITIONS* Identification of risk Compagnie Plastic Omnium SE periodically carries out external growth operations through acquisitions that may be of a significant size across the Group. These acquisitions are decided on the basis of assumptions, notably, objectives relating to synergies and future results, which may not be achieved in the timescales or to the extent initially expected. In particular, Compagnie Plastic Omnium SE could encounter difficulties integrating the companies acquired, their technologies, product ranges and employees. It may also be unable to retain or develop strategic clients of the acquired companies. Risk management Compagnie Plastic Omnium SE takes great care to put resources in place dedicated to integrating acquired companies and sets detailed objectives for these, broken down into action plans. Particular care is taken to ensure the swift implementation of Plastic Omnium’s systems in acquired entities, in order to effectively manage these action plans and measure the achievement of objectives. INFORMATION TECHNOLOGY RISK Identification of risk The day-to-day activity of Compagnie Plastic Omnium SE’s operational functions (Research and Development, Production, Purchasing, Logistics, Commercial) and support functions Finance, Human Resources, Legal) is highly dependent on the smooth running of the information systems used in these functions. This activity could be affected by the unavailability of critical information systems, mainly due to system breakdown, communication networks failure, damage to infrastructure or malicious actions carried out internally or externally. Risk management The Information Systems Department has implemented a systems standardization and consolidation approach, and is constantly upgrading IT and network production infrastructures, business applications and workstation services. Management pays special attention to the incorporation of new technologies and to the availability and integrity of Company data. The security of technical systems, applications and networks is addressed at the outset of projects. It is constantly monitored and regularly audited.