1.7.2 Financial risks
The management of financial risks is detailed in Note J.27 to the consolidated financial statements, page 358.
| Risk identification |
Risk management procedures |
| Risk identificationa) 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
|
Risk identificationb) Market risk
- Interest rate risk: changes in interest rates and spreadsapplied 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
|
| Risk identificationc) 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
|
| Risk identificationd) 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
|
2. Risk management principles and participants
2.1 Reference framework, definitions and scope of risk management and internal control
In July 2010, the Autorité des Marchés Financiers (AMF, the French securities regulator), published a reference framework concerning risk management and internal control systems (“Cadre de référence sur les dispositifs de gestion des risques et de contrôle interne”). The VINCI Group uses this document as the basis for its own framework.
The risk management and internal control systems play complementary roles in the conduct of VINCI’s activities. They aim to identify and analyse the principal risks to which the Group’s subsidiaries are exposed and help to:
- preserve the value, assets and reputation of the Group;
- secure decision-making procedures and other internal processes;
- ensure that initiatives are in line with the Group’s values;
- foster a shared view of the principal risks among employees.
These systems, however well conceived and implemented, cannot provide an absolute guarantee that the Group will achieve its objectives.
In addition to setting up a specific system for the VINCI holding company, the Group also ensures that its business lines put in place risk management and internal control systems that are appropriate for their subsidiaries.
The scope of risk management and internal control includes fully consolidated subsidiaries.
2.2 Environment and organisation
2.2.1 Principles of action and conduct
The businesses in which VINCI operates require the personnel involved to be geographically close to customers in order to ensure the prompt delivery of solutions that are suited to their needs. To enable the manager of each business unit – of which there are around 4,000 in total in the Group – to take the required operational decisions rapidly, each business line has put in place an organisational structure suited to its activities.
In this context, the Group has delegated authority to operational and functional staff at all levels of the organisation. Delegation of authority and responsibility to these staff is carried out in compliance with the general guidelines (see paragraph 2.4.2, page 186) and the following VINCI principles of action and conduct:
- Compliance with the rules common to the whole Group in respect of commitments, risk-taking (see paragraph 2.4.3, page 186), acceptance of contracts (see same paragraph), and reporting of financial, accounting and management information (see paragraph 2.4.6, page 187).
- Transparency and loyalty of managers towards their management superiors and towards the central functional departments of the business lines and the holding company. An integral part of operational managers’ duties is to take decisions on matters falling within their area of responsibility, within the framework of the general guidelines they have received and accepted. Nevertheless, any significant difficulties encountered must be handled with the assistance, as necessary, of their management superiors and/or the functional departments of the business lines or the VINCI holding company.
- Compliance with the laws and regulations in force in the countries where the Group operates.
- A culture of financial and non-financial performance.
