Plastic Omnium - 2020 Universal Registration Document

RISK FACTORS AND MANAGEMENT Main risk factors www.plasticomnium.com PLASTIC OMNIUM UNIVERSAL REGISTRATION DOCUMENT 2020 64 " # $ "# 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. implemented by Compagnie Plastic Omnium SE). In accordance with regulations, only those risks that are both significant and specific to Compagnie Plastic Omnium SE are described below. The table below classifies these risks by category and indicates their importance (high or These risks have been assessed based on the probability of occurrence moderate) based on their assessment. and their impact (after taking into account the mitigation measures Risk categories Importance Risk factors Non-financial risk Operational risks High Pandemic High Automotive programs High Quality of products and services sold YES Moderate Health, Safety and Environment YES Moderate IT YES Strategic risks High External growth transactions Credit and/or Counterparty risks High Trade receivables Moderate Suppliers YES Market risks Moderate Commodity prices Legal risks Moderate Competition law YES Moderate Intellectual property OPERATIONAL RISKS PANDEMIC RISK Identification of risk Compagnie Plastic Omnium SE is exposed to the risk of a pandemic that could occur at country level or on a larger scale, either regionally or globally. In an extreme situation such as that experienced in the first half of 2020, initially in China and then in the rest of the world, Plastic Omnium’s business could be suddenly interrupted in many plants. These interruptions would be the consequence of the shutdown of production in customer plants, either due to closures imposed by the local health situation, or constrained by problems sourcing components from suppliers operating in a region affected by a local pandemic. A pandemic can also cause a significant drop in demand in the automotive market, resulting in a decline in business for carmakers and equipment manufacturers. These stoppages or slowdowns may have a significant impact on Compagnie Plastic Omnium SE’s revenue, results and cash position. Risk management the partial unemployment schemes that exist in most of the countries where the Group operates and on the non-renewal of temporary employees' contracts. In addition, the Group has historically implemented a strategy aimed at ensuring, even in these exceptional situations, the liquidity to meet its commitments to third parties. This strategy is based on the implementation of medium-term financing both through private placements and through confirmed bank credit lines, without covenants, with leading banking institutions. Faced with this type of situation, the Group is able to immediately implement significant expenditure reduction plans in order to limit the impact on its results and cash flow. These plans are based in particular on 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 invest and/or spend more 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 their design.