Plastic Omnium - 2020 Universal Registration Document

RISK FACTORS AND MANAGEMENT www.plasticomnium.com PLASTIC OMNIUM UNIVERSAL REGISTRATION DOCUMENT 2020 66 STRATEGIC RISKS RISK RELATED TO ACQUISITIONS Identification of risk Compagnie Plastic Omnium SE periodically carries out external growth operations through acquisitions or partnerships that may be of a significant size across the Group. These transactions are decided on the basis of assumptions, notably, objectives of market growth, 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 overseeing partnerships or 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. CREDIT AND/OR COUNTERPARTY RISKS CUSTOMER RISK Identification of risk Due to its business as an automotive supplier, Compagnie Plastic Omnium SE has a limited number of customers (93 in 2020) and cannot rule out the possibility that one of its customers might find itself in financial difficulty thus preventing it from respecting certain commitments. Risk management A balanced division of revenue by carmaker has improved in recent years. In all the Group's businesses, review procedures are carried out before the results of bids are issued, in particular to ensure a balanced portfolio of customer receivables, in line with a target profile defined and continually monitored by Compagnie Plastic Omnium SE’s senior management. In terms of risk management, the Group’s business lines have set up structured customer risk monitoring and debt collection processes. The average DSO was 45 days in 2020. Receivables over six months past due amounted to €6.9 million net of provisions. At December 31, 2020 the risk of non-recovery was low and involved only a non-material amount of receivables more than twelve months past due (see Note 6.3.1 to the consolidated financial statements page 248). SUPPLIER RISK Identification of risk Default by a major supplier, in particular a supplier of specific components, for which rapid substitution is difficult, given the work and time necessary to accredit a new supplier, could disrupt Compagnie Plastic Omnium SE’s production. This default could also generate additional investments or costs impacting Compagnie Plastic Omnium SE’s operating margin. The principal failure scenarios are a supplier’s bankruptcy, the supplier’s failure to meet quality specifications, or even a fire, natural disaster, strike or pandemic, which would impact a supplier’s plant and permanently disrupt its production. Risk management With a view to reducing these risks, all suppliers of specific automotive components must be accredited according to meticulously defined operational, financial and non-financial criteria. For approved suppliers, these criteria are then regularly monitored by the Purchasing and Quality Assurance Departments. At-risk suppliers are subject to special monitoring and when necessary safety stocks are put in place. Lastly, operating units are especially vigilant in this area. They focus on effectively anticipating and managing breakdowns in the supply chain that, while infrequent, can ultimately develop rapidly. In 2020, Compagnie Plastic Omnium SE had no major supplier failures that have had a significant impact on its own operations or those of its customers. MARKET RISKS Disclosures about market risks are also provided in the notes to the consolidated financial statements. RAW MATERIALS PRICE RISK Identification of risk Compagnie Plastic Omnium SE’s business requires the purchase of large quantities of raw materials (particularly plastic and paints) subject to price variations that could have an impact on its operating margin. Risk management To limit the impact of price fluctuations, Compagnie Plastic Omnium SE has implemented price indexation clauses with most of its customers or, failing that, regularly renegotiates selling prices.