Cyber risks and fraud
As in 2020, remote working in 2021 led to an increase in cyber risks because of the greater number of remote connections, which represent a source of vulnerability to malicious activity. By continuing to strengthen its IT security measures, the Group was able to protect its information systems.
Workforce-related and social risks
The public health situation brought about by the pandemic prompted VINCI to be more vigilant about health and safety risks for its employees, partners, subcontractors, customers and other stakeholders.
Financial and economic risks
The health crisis had repercussions on the financial positions of some of Group’s subsidiaries that could affect their credit ratings.
This type of exceptional event carries a temporary risk of non-compliance with the covenants of their financing agreements, as was the case for London Gatwick airport, which nevertheless obtained a waiver of its financial covenants in September 2021.
In addition, in this uncertain context, VINCI is paying particular attention to the impairment tests performed on assets to ensure that their recoverable amount remains higher than their carrying amount.
2. Risk factors
The risks that may affect VINCI’s performance are identified, assessed and handled at the different organisational levels (holding company, business line, subsidiary), within the framework of VINCI’s decentralised organisation.
Group companies might be subject to risks related to the environmental and social conditions in the areas where they operate. As VINCI is a major participant in the economy, any risk that materialises could tarnish the entire Group’s image.
2.1 Operational risks
Depending on its business, each Group company is exposed to specific operational risks, which are prevented, monitored and managed differently.
One of the key elements of VINCI’s risk management system is the existence of risk committees at each level of the organisation, and in particular at the holding company level. These committees examine, at the preliminary phase, all proposals that involve commitments to new projects as part of the decision-making process followed by the business lines for investments exceeding certain thresholds. These thresholds are defined in the general guidelines provided to the various managers of the Group’s entities. The operating procedure for these committees and their composition are described in paragraph 3.4.3, page 169.
2.1.1 Business risks
ENERGY AND CONSTRUCTION
The Group’s Energy and Construction businesses serve a large number of public and private entities in 100 or so countries and operate under fixed-term contracts covering periods of a few weeks to several years.
Performance under these contracts includes a design phase followed by a construction phase, which ends with the handover of the finished project.
| Risk identification |
Risk management procedures |
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Before the contract is signed
- – Poor evaluation of the project, customer or country
- – Errors in design and cost estimates
- – Errors in interpreting contract clauses
- – Overestimation of available internal resources
- – Poor evaluation of subcontracting costs
Possible consequences:
- – Organisational, technical, contractual, administrative or regulatory difficulties affecting performance under the contract that could impact lead times, costs, cash flow, quality or the Group’s reputation
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Before the contract is signed
- – Poor evaluation of the project, customer or country
- – Errors in design and cost estimates
- – Errors in interpreting contract clauses
- – Overestimation of available internal resources
- – Poor evaluation of subcontracting costs
Possible consequences:
- – Organisational, technical, contractual, administrative or regulatory difficulties affecting performance under the contract that could impact lead times, costs, cash flow, quality or the Group’s reputation
Risk management procedures
- – Prior analysis as part of a project selection meeting
- – Presentation to the Risk Committee before a bid is submitted (see paragraph 3.4.3, page 169), with risk scorecards
- – Negotiation with the customer for a balanced sharing of risk
- – Assessment of the proper size of the teams in charge
- – Taking into account of feedback from previous projects during the design phase
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After the contract is signed
- – Insufficient preparation time
- – Errors in the selection of equipment and methods
- – Insufficient or poorly adapted human resources or supplies
- – Difficult relationship with the customer
- – Unexpected events and obstacles
- – Pollution or environmental accidents
- – Changes imposed by the customer during construction
- – Poor contract management
- – Variation in materials and supply costs
- – Disruption in the supply chain and raw material and labour shortages
- – Default of partners (co-contractors, suppliers, subcontractors) or customers
- – Customer disagreement on invoicing and the final breakdown of expenses
Possible consequences:
- – Organisational, technical, contractual, administrative or regulatory difficulties affecting performance under the contract that could impact lead times, costs, cash flow or quality
- – Damage caused to third parties
- – Damage to the Group’s reputation
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After the contract is signed
- – Insufficient preparation time
- – Errors in the selection of equipment and methods
- – Insufficient or poorly adapted human resources or supplies
- – Difficult relationship with the customer
- – Unexpected events and obstacles
- – Pollution or environmental accidents
- – Changes imposed by the customer during construction
- – Poor contract management
- – Variation in materials and supply costs
- – Disruption in the supply chain and raw material and labour shortages
- – Default of partners (co-contractors, suppliers, subcontractors) or customers
- – Customer disagreement on invoicing and the final breakdown of expenses
Possible consequences:
- – Organisational, technical, contractual, administrative or regulatory difficulties affecting performance under the contract that could impact lead times, costs, cash flow or quality
- – Damage caused to third parties
- – Damage to the Group’s reputation
Risk management procedures
- – Organisation of worksite preparation
- – Specific risk management systems tailored to the business line (Codex at VINCI Energies, Kheops and Orchestra at VINCI Construction)
- – Application of contractual price adjustment formulas and upstream assessment of the impact of changes in costs not covered by the formulas
- – Transfer of risk to subcontractors and suppliers
- – Campaigns to raise awareness about environmental risks, monitoring and follow-up of environmental performance indicators
- – Prior selection of robust solutions or equipment to deal with uncertainties
- – Discussions with the customer, amicable settlement committees and legal action if necessary
- – Payment guarantees, contract clauses
- – Insurance policies (see paragraph 3.5, pages 170 to 171)
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