Risk factors
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LISI 2014FINANCIALREPORT
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2.3
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Environmentalrisks
The LISI Group is committed to protecting the environment while
manufacturing its products. Any negative impact resulting from its
activities isminimal, and specific attention is paid towater, energy and
wastemanagement.
Its industrial and environmental policy aims tomanage itsmajor risks,
whichare:
-the risk of fire and its potential impact on affected sites or their
environment.
-theriskofsoilorwatertablepollution.
Thisriskmanagementpolicy involves:
-theongoing improvement of the fireprotectionof the sites,whichare
subjecttoannualmonitoringandvisits,
- investment in protection, with the installation of sprinkler systems or
upgradingofexistingsystems.
-pollution risk prevention: the Group is implementing an appropriate
preventionpolicy.
As part of the manufacturing sites’ compliance program, and in the
absence of any ongoing legal disputes, theGrouphasmade provisions
foranoverallsumof€15M.Concretemeasuresarebeingtakentoprevent
soil pollutiononold sites, including carryingoutmonitoringactivities in
concertwith the local authorities, on the one hand, and implementing
retrofittingwork,ontheotherhand.
Morespecifically, asumof€4.4Mhasbeenestablishedwhich relates to
theassessedcostofdecontaminatingtheTorrancesite (California–USA)
which suffered TCE (solvent) pollution several years ago (before 1975).
Theprocess that is currently inprogress involves pumpingand filtering
undergroundwaterdownstream from the site. This treatmenthasbeen
used to treat more than 40.8 tons of solvents (TCE equivalents). The
estimatedamountatDecember31,2014,facilitateshandlingoftreatment
inaccordancewiththetechniquesrecommendedbyouradvisors.Liaison
with theauthoritieshas led to theswiftclosureof thesoils fileand to the
acceptanceofmeasurestakenwithregardtothedeepestwaters.
Ontheotherhand, theentryoftheManoirAerospaceGroupexplainsthe
amountof€2.5M fortheretrofittingof industrialsites.
Furthermore,provisionsforsoilandbuildingsremediationwererecorded
on the French sites of LISI AEROSPACE (€ 4M) and LISI AUTOMOTIVE
(€2.5M).
As part of the Social and Environmental Responsibilities requirements,
LISI Automotive undertakes to reduce the impact of its activities on
the environment and to ensure healthy, safe working conditions for
all its employees and service providers, as part of theGlobal Compact.
CommitmentNo. 7 states that "businesses areencouraged toapply the
precautionary approach to environmental challenges". Commitment
No. 8 plans toundertake "initiatives topromote greater environmental
responsibility".
Finally,CommitmentNo.9promotes"thedevelopmentanddissemination
of environmentally friendly technologies". In order to comply, LISI
AUTOMOTIVEhasimplementedthreespecificmeasures:standardization
of practices and definition of indicators, risk management organized
around the COSO benchmark and implementation of action plans for
environmentalsafety.
The environmental preventive measures are described in Chapter 6,
paragraphs2and4.
2.4
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Legalrisks
The Group is involved in a limited number of legal proceedings with
thirdparties (notcustomers).All thesedisputeshavebeenreviewedwith
our Auditors and the most significant were appreciated by the Audit
Committee. Generally speaking, all legal positions are determined and
reviewedbythird-partyand in-housespecialists.
Exceptforthedisputesreferredtoabove,foraperiodcoveringat leastthe
last twelvemonths, no governmental, legal, or arbitrationproceedings
(including any proceedings of which the Group is aware, which is
pendingor of which it is threatened) are tobe reported thatmay have
orhave recentlyhadsignificanteffectson theGroup's financial situation
or profitability. The amount of provisions for legal risks found to 31
December2014 isnotmaterial.
2.5
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IT-relatedrisks
For eachof itsdivisions, theGrouphas identifiedan IT safeguardaction
plan likelytobe implemented intheeventofaseriousfailure. Inaddition,
theGrouphas insured risksof interruptionsandmalfunctions, or forced
use,of its ITsystemswithaspecificpolicy.
2.6
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Otherrisks
2.6.1Rawmaterialsrisks
The LISI Group is potentially exposed to changes in the costs of the
rawmaterials (steel, alloys, plastics, aluminum, and titanium) used in
the course of its business activities. Nevertheless, theGroup estimates
that such price increases are unlikely to impact negatively on its profit
margins. Indeed, some commercial contracts include price-revision
formulae which allow selling prices to be varied in accordance with
changes to rawmaterial costs. Suppliers work to limited time frames
based on guaranteed-price contacts. At December 31, 2014, the LISI
Group uses no financial instruments to manage its future exposure
to changes in the costs of such rawmaterials. It can still benefit from
agreementswithsupplierstohedgeagainstannualormulti-yearperiods
to limitthe impactof fluctuations inoreprices.
