Most of the Group’s projects are relatively short in duration, particularly those carried out as part of VINCI Energies’ activities and in roadworks, which means that changes in costs can generally be factored into quotes for new contracts. Some long-term contracts contain price adjustment clauses based on changes in sectoral indices. In particular, construction contracts signed with public sector customers in France fall into this category.
As regards the availability of the materials and equipment necessary to complete projects, VINCI’s decentralised model means that the Group’s companies have a diverse range of procurement sources, which is an advantage in the current operating environment. In addition, to guard against supply shortages, the Group’s companies may order some of their supplies ahead of time.
- In the Concessions business
Price increases relating to the infrastructure managed by the Group (motorways and airports) are generally determined by contractual provisions that take the level of inflation into account, thereby offsetting at least some of this risk.
Higher interest rates and the increasing cost of debt have an impact on the financing and valuation of concession assets.
- In property development
Rising interest rates have led to an increase in borrowing costs. Combined with higher prices, this trend is putting pressure on consumer demand for residential property. Meanwhile, investors in non-residential properties (offices) are now demanding higher yields.
Cyber risks and fraud
The reinforcement and continuous improvement of IT security measures are key priorities for the Group. The Ukraine conflict has increased cyber risks, particularly in relation to strategic assets and activities of vital importance, both in France and abroad.
Workforce-related and social risks
The Group has endeavoured to ensure the safety and security of its employees, partners, subcontractors and other stakeholders who could be directly or indirectly impacted by the effects of conflicts in its operating countries.
The Group has also examined the considerable social and human consequences of geopolitical tensions in certain regions of the world. In particular, the return to Ukraine of men mobilised for the war effort who previously worked in neighbouring Eastern European countries has accentuated the risk of labour shortages.
Furthermore, the Group’s size, the diversity of its geographical locations and its reputation expose it to actions that could endanger the perception of its commitment to social responsibility.
Financial and economic risks
The current macroeconomic environment has led to a tightening of monetary policy around the world and higher interest rates. This makes financing more expensive for the Group and its subsidiaries. In the circumstances, VINCI is taking particular care to maintain its good level of liquidity.
In addition, assets are tested for impairment on a regular basis to ensure that their recoverable amount remains higher than their carrying amount.
2. Risk factors
The risks that may affect VINCI’s performance and image are identified, assessed and handled at the different organisational levels (holding company, business line, subsidiary), within the framework of VINCI’s decentralised organisation.
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 a Risk Committee at each level of the organisation, with the largest projects presented before the Risk Committee at the holding company level. These committees examine, at the preliminary phase, all proposals that involve commitments to new projects exceeding certain thresholds. These thresholds are defined in the general guidelines provided to the various operational managers. The operating procedure for these committees and their composition are described in paragraph 3.4.3, “Procedures related to commitments and the VINCI Risk Committee”, page 184.
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.