LISI 2012 FINANCIAL REPORT
90
5
Risk factors
The company has carried out a review of the potential risks
which could have an unfavorable effect on its business, its
financial situation or its results (or on its capacity to achieve
its objectives) and considers that there are no significant risks
other than those disclosed.
1
Risk management
1.1 Following COSO guidelines
Since 2004, the group has beenmapping risks in line with COSO
guidelines. More recently it has also been drawing upon the
provisions of Article L-225.37 of the French Commercial Code
on financial security and the recommendations of the French
financial regulatory authority, the AMF. Having identified and
listed risks at the level of each individual unit (production
or distribution sites) the group classifies consolidated risk
within a matrix showing occurrence probability and severity
rate. Then a "top down" approach helped prioritize risks. Each
risk identified is subject to an action plan which is updated
quarterly. A link is automatically made to proactive initiatives
for hazard prevention, insurance or accounting services.
1.2 Strengthening cooperation with
our insurers
The consistency of the relationship with insurers and risk
classification has helped to structure the Group's prevention
approach. Thus, all of the insurers' recommendations regarding
damage to property are included in the Environmental Safety
Improvement Plans and are subject to periodic monitoring by
the Risk Monitoring Committee. Our insurers revisit a number
of sites each year, looking both at damage to assets and
environmental risks, and then present their recommendations
which enhance our action plan. Since 2002, all significant
sites have been audited several times, except those that were
recently integrated in the Group, which have been audited
only once. This ongoing improvement initiative is improving
our prevention policy and enables us to optimize our insurance
premiums.
1.3 Drawing up action plans
The action plans for safety / environment / prevention
identified within the Group allow for a synthesis of hazard
identification on the one hand, the preventive approach on the
other, and finally asset preservation and control of operations
within the Group. The program is coordinated by the head
company of the LISI Group in the areas of HSE, internal controls,
finance and cash flow management.
2
Informations on issuer
risks
In an approach meant to analyze the general and specific risks
the Group is exposed to, the following categories have been
identified:
- operating risks,
- strategic risks,
- environmental risks,
- legal risks,
- IT-related risks,
- credit, liquidity, market and currency risks (see note 2.4),
- other risks.
LISI has no exposure risk related to the sovereign debt crisis in
some states that display contrasting growth prospects.
2.1 Operating risks
2.1.1 Exposure to risk of natural disaster or industrial action
In common with any other company, the LISI Group could be
disrupted by industrial strike action or natural disasters such
as flooding, earthquake or even pandemic. Such events could
negatively affect Group sales revenue or cause a substantial
increase in expenses required to cover system maintenance or
repair. However, due to the diversity of the sites, the LISI Group
cannot be exposed for more than 10% of its overall business.
2.1.2 Acquisitions
In order to manage any risks related to the integration of
newly-acquired companies and to ensure the transferal of
Group management principles, the LISI Group’s policy is to
acquire a total or at least strong majority controlling stake in
the capital of any potential acquisitions. Any acquisition or sale
plans are subject to approval by the Board of Directors. All the
group’s acquisitions are the subject of an in-depth audit of the
risk areas at the target company. The Group generally sets up
mixed teams, using internal and external experts. With the
exception of a joint venture in India "Ankit", the Group holds all
