| Risk identification |
Risk management procedures |
- – Cyclical business
- – Risk of obtaining permits; recourse to third parties
- – Poor project and programme definition (number and size of residential units, quality category)
- – Poor choice of partner and subcontractor companies
- – Deterioration in the financial condition of investors and buyers
- – Less favourable lending terms
- – Defects in workmanship
- – Changes in applicable regulations, particularly those relating to the environment
Possible consequences:
- – Overvaluation of land
- – Construction permit not obtained
- – Programme not in line with market preferences
- – Buyers cannot obtain bank financing
- – Lack of demand
- – Insufficient occupancy (offices, residential)
- – Risk of unsold properties
- – Cost overruns, delays or abandonment of certain projects
- – Damage to the Group’s reputation
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- – Cyclical business
- – Risk of obtaining permits; recourse to third parties
- – Poor project and programme definition (number and size of residential units, quality category)
- – Poor choice of partner and subcontractor companies
- – Deterioration in the financial condition of investors and buyers
- – Less favourable lending terms
- – Defects in workmanship
- – Changes in applicable regulations, particularly those relating to the environment
Possible consequences:
- – Overvaluation of land
- – Construction permit not obtained
- – Programme not in line with market preferences
- – Buyers cannot obtain bank financing
- – Lack of demand
- – Insufficient occupancy (offices, residential)
- – Risk of unsold properties
- – Cost overruns, delays or abandonment of certain projects
- – Damage to the Group’s reputation
Risk management procedures
- – Presentation to the Risk Committee prior to acquisition of the land and/or launch of property development operations
- – Separation into three areas of expertise: residential property, business property, property services
- – Conditions precedent in land purchase contracts (obtaining building permit, pre-sale percentage, etc.)
- – Limiting transactions with no reservations; minimum pre-sale threshold required
- – Strengthening controls for assigning and tracking construction work
- – Developing a strategy to ensure that no reservations are raised at the handover for quality programmes
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2.1.2 Acquisition and disposal of companies
| Risk identification |
Risk management procedures |
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The Group’s growth has long been based on a proactive acquisition policy, focusing on companies of all sizes, in all its business lines.
Risks related to these acquisitions:
- – Reliability of the financial information provided and the business plan drawn up by the sellers
- – Corporate governance continuity and integration of newly acquired companies
- – Potential hidden disputes
- – Corporate culture compatibility between buyer and seller
- – Damage to the Group’s reputation
- – Compliance issues
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The Group’s growth has long been based on a proactive acquisition policy, focusing on companies of all sizes, in all its business lines.
Risks related to these acquisitions:
- – Reliability of the financial information provided and the business plan drawn up by the sellers
- – Corporate governance continuity and integration of newly acquired companies
- – Potential hidden disputes
- – Corporate culture compatibility between buyer and seller
- – Damage to the Group’s reputation
- – Compliance issues
Risk management procedures
Proposed acquisitions and disposals are submitted to the VINCI Investment Committee for approval. The largest projects are also submitted to the Strategy and CSR Committee of the Board of Directors (see chapter C, “Report on corporate governance”, paragraph 3.4.2, page 137) and in some cases to VINCI’s Board of Directors (see chapter C, “Report on corporate governance”, section 2, beginning on page 121). A procedure for the acquisition and sale of financial assets and a risk analysis based on specific criteria are applied to these projects.
VINCI’s external growth policy is to:
- – create value for VINCI shareholders;
- – target companies with which synergies can be created due to their expertise, their market positioning or their geographic location;
- – generally, take a majority interest in the share capital of target companies in order to limit risks associated with their integration and to be able to quickly apply the Group’s management principles;
- – seek out corporate culture compatibility in order to facilitate the integration of new acquisitions into the Group.
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2.2 Legal risks
2.2.1 Contractual relationships
As a general rule, the Group’s contracts are subject to the laws of the countries in which the projects are executed, supplemented where possible by the arbitration clause of the International Chamber of Commerce, in particular for countries where the legal system might not offer sufficient protection.
As mentioned above in paragraph 2.1, “Operational risks” (see page 159), disputes may arise during the performance of said contracts. Detailed information on the principal disputes and arbitrations in which the Group is involved can be found in Note M to the consolidated financial statements, pages 342 to 344. These disputes are examined on the date the financial statements are approved and, if necessary, provisions are constituted to cover the estimated risks.
| Risk identification |
Risk management procedures |
- – Different interpretations of new items arising during the performance of the contract
- – Change in the contracting authority’s governance
- – New jurisprudence
- – Misinterpretation of contractual clauses
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- – Different interpretations of new items arising during the performance of the contract
- – Change in the contracting authority’s governance
- – New jurisprudence
- – Misinterpretation of contractual clauses
Risk management procedures
The Group’s policy is to limit its risk during the proposal phase by seeking to negotiate terms with contracting authorities that:
- – pass onto the customer the extra costs and/or additional time stemming from changes implemented at the customer’s request after the contract is signed;
- – halt construction in the event of non-payment;
- – exclude indirect damages;
- – exclude or limit liability relating to existing pollution;
- – limit its contractual responsibility for the total project to a reasonable percentage of the contract amount;
- – cap delay and performance penalties at an acceptable percentage of the contract amount;
- – stipulate contractual provisions allowing for adjustments (price and time schedule) to account for legal, tax or regulatory changes;
- – obtain protection via a force majeure clause (against political risk, a unilateral decision of the customer or concession-granting authority, economic upheaval, poor weather conditions) or for early contract termination;
- – obtain an international arbitration clause;
- – keep an eye on the activation of insurance cover.
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