| Risk identification |
Risk management procedures |
- Infringement of the Group’s ethical principles
- Infringement of anti-corruption regulations
- Infringement of competition rules
Possible consequences:
- Damage to the Group’s image and reputation
- Erosion in the trust of investors, customers or partners
- Exclusion from public contracts
- Fines
- Remedial action or contract cancellation
- Difficulty in responding to calls for tender
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- Infringement of the Group’s ethical principles
- Infringement of anti-corruption regulations
- Infringement of competition rules
Possible consequences:
- Damage to the Group’s image and reputation
- Erosion in the trust of investors, customers or partners
- Exclusion from public contracts
- Fines
- Remedial action or contract cancellation
- Difficulty in responding to calls for tender
Risk management procedures
- Strong commitment of management at the highest level
- Development of a network of ethics and compliance officers
- Structured governance :
- The seven-member Ethics and Vigilance Committee (of whom five are members of the Executive Committee) supervises the deployment of compliance procedures covered by the Code of Ethics and Conduct, in particular with regard to the following areas :
- preventing corruption;
- preventing serious violations of human rights and fundamental freedoms, harm to human health and safety, or damage to the environment resulting from Group activities.
- The Ethics and Compliance Club, which includes the Ethics and Vigilance Director, the Chief Audit Officer, as well as representatives of each of the business lines and divisions, keeps close tabs on ethics-related legislation and promotes best practices.
- The GDPR Representatives Club supports the business lines and ensures the Group complies with Regulation (EU) 2016/679 on data protection and privacy, known as the General Data Protection Regulation (GDPR).
- Training programmes and information sessions to aid in the detection and prevention of corruption, in particular through broad dissemination of the Code of Ethics and Conduct and the Anti-corruption Code of Conduct within the Group and among the Group’s partners
- Multi-criteria evaluation of third parties (customers, suppliers, subcontractors, service providers) through questionnaires, due diligence and quality audits
- Whistleblowing system: the VINCI Integrity online platform for reporting serious infringements of the Group’s rules and commitments
- Audits of corruption prevention measures
- Joint review of ethics aspects by the Audit Department and the Ethics and Vigilance Department during certain internal audits
VINCI’s internal system for managing ethical risks is described in paragraph 2.4, “Business ethics”, of chapter E, “Workforce-related, social and environmental information”, page 217.
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2.7 Financial and economic risks
2.7.1 Changes in the economic and tax environment
| Risk identification |
Risk management procedures |
a) Deterioration of the economic environment in markets where VINCI operates:
- Weakening of demand
- Rising levels of competition
- Cost and availability of energy and raw materials
- Increase in inflation
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a) Deterioration of the economic environment in markets where VINCI operates:
- Weakening of demand
- Rising levels of competition
- Cost and availability of energy and raw materials
- Increase in inflation
Risk management procedures
- Diversification of the Group’s business lines
- Geographical diversification of the Group’s activities
- Potential order intake tracking
- Monitoring of order book and margins
- Responsiveness and agility of Group companies, made possible by VINCI’s decentralised model
- Insertion of a price adjustment clause in contracts
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b) Unanticipated changes in tax policy
- Impact on bids submitted to customers, margins for Group companies and the valuation of external growth transactions
- Tax compliance risks (late filing of returns, inaccurate returns or omissions in returns) or technical tax risks (lack of formalisation, misinterpretation of rules, etc.) that may have a reputational impact as well as adverse financial consequences
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b) Unanticipated changes in tax policy
- Impact on bids submitted to customers, margins for Group companies and the valuation of external growth transactions
- Tax compliance risks (late filing of returns, inaccurate returns or omissions in returns) or technical tax risks (lack of formalisation, misinterpretation of rules, etc.) that may have a reputational impact as well as adverse financial consequences
Risk management procedures
- Commitment by the Group to meet its tax obligations, in full compliance with applicable local and international laws
- Monitoring of changes in tax policy by Finance departments at Group companies and the holding company
- Participation by the Group in the Company Partnership Service programme put in place by the French tax authorities and similar services established by tax authorities in other countries, with the aim of securing the Group’s tax positions
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2.7.2 Financial risks
The management of financial risks is detailed in Note J.27 to the consolidated financial statements, page 350.
| Risk identification |
Risk management procedures |
a) Liquidity risk relating in particular to:
- obligations to repay existing debt;
- commitments to finance investment programmes of concession companies;
- general requirements of the Group, relating in particular to acquisitions of new companies.
Some financing agreements include early repayment clauses applicable in the event of non-compliance with financial covenants.
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a) Liquidity risk relating in particular to:
- obligations to repay existing debt;
- commitments to finance investment programmes of concession companies;
- general requirements of the Group, relating in particular to acquisitions of new companies.
Some financing agreements include early repayment clauses applicable in the event of non-compliance with financial covenants.
Risk management procedures
- Maintenance of credit ratings (see c below)
- Extension of debt maturity
- Diversification of financing sources
- Centralised cash management
- Ensuring a minimum level of centrally managed net cash at all times
- Arrangement of confirmed and undrawn backup credit facilities
- Implementation of a Group reporting procedure to monitor changes in financial covenants and negotiate if necessary with lenders to prevent a potential event of default triggered by non-compliance with covenants
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b) Market risk
- Interest rate risk: changes in interest rates and spreads applied by lenders
- Exchange rate risk for activities and investments outside the eurozone
- Commodity risk for supplies (electricity, gas, bitumen, fuel, concrete, metals, timber, solar panels, etc.) and on revenue streams for certain customers
- Equity risk: investments in listed entities, treasury shares, assets covering retirement benefit obligations, etc.
- Risks associated with inflation and market volatility
- Small scale of capital markets in emerging countries
- Currency transferability and non-convertibility risks
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b) Market risk
- Interest rate risk: changes in interest rates and spreads applied by lenders
- Exchange rate risk for activities and investments outside the eurozone
- Commodity risk for supplies (electricity, gas, bitumen, fuel, concrete, metals, timber, solar panels, etc.) and on revenue streams for certain customers
- Equity risk: investments in listed entities, treasury shares, assets covering retirement benefit obligations, etc.
- Risks associated with inflation and market volatility
- Small scale of capital markets in emerging countries
- Currency transferability and non-convertibility risks
Risk management procedures
- Centralisation of market transactions (front office)
- Policy on conversion of net debt from fixed to floating rate (in line with an Ebitda multiple), with the remainder of net debt maintained at fixed rate to better manage the Group’s borrowing costs
- Policy on the hedging of transactional exchange rate risk (always hedged) and asset-related exchange rate risk (relevance analysed on an individual currency basis)
- Management on a case-by-case basis of commodity price risk (advances at the start of operations, agreements with suppliers, use of derivative financial instruments)
- Periodic review of assets covering retirement benefit obligations
- Negotiation with clients with multi-currency contracts to limit the risk of balances in exotic, non-transferable or non-convertible currencies
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c) Credit rating downgrade risk for the Group entities assigned such ratings as a result of:
- events materially affecting the financial position of VINCI or its subsidiaries,
- a significant change in the Group’s business mix,
- changes in methodology introduced by rating agencies.
The Group’s financing terms could thus become dearer and its access to financing could even be made more difficult.
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c) Credit rating downgrade risk for the Group entities assigned such ratings as a result of:
- events materially affecting the financial position of VINCI or its subsidiaries,
- a significant change in the Group’s business mix,
- changes in methodology introduced by rating agencies.
The Group’s financing terms could thus become dearer and its access to financing could even be made more difficult.
Risk management procedures
- Monitoring procedure for financial ratios (both actual and projected) tracked by the agencies and contributing to the determination of the rating
- Regular dialogue with rating agencies and tracking of any agency methodology changes that might have an impact on the Group’s rating
- When the Group is considering a major acquisition, submission of financial projections to rating agencies for their opinion regarding the potential impact on the rating assigned to the Group
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| d) Counterparty risk stemming from contracts and financial instruments contracted with banks and other financial institutions, should the debtor be unable to honour all or part of its commitment |
d) Counterparty risk stemming from contracts and financial instruments contracted with banks and other financial institutions, should the debtor be unable to honour all or part of its commitment Risk management procedures
- Centralisation of cash management and financing requirements of business lines
- Cash investments in short-term and liquid vehicles with banking partners (minimum rating criteria) and in money market UCITS, with centralised monitoring of exposure limits and control ratios
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