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A regular assessment of the risks inherent to the GBL group and the effectiveness of the internal control system

This section presents a summary table that categorises the main risks related to GBL’s activities and the various factors and measures mitigating their potential negative impact.

The section ends with a detailed description of the internal control and risk management system’s formalisation based on the COSO model.

Risk mapping and schematic representation of the risk identification, assessment and control process

Risk management and internal control

Main risks Risk factors Mitigants
Exogenous

Risks associated with shifts in external factors such as economic, political or legislative change
  • Changes in financial markets, notably with regards to the volatility of share price and interest and foreign exchange rates
  • Changes in macroeconomic variables (growth rates, monetary policy, inflation, raw materials and commodity prices, etc.)
  • Regulatory or budgetary policy changes, for example involving tax reform
  • Specific developments affecting certain geographic areas (Eurozone, emerging countries, etc.)
  • Geographic and sector diversification of the portfolio with differentiated cyclical exposure
  • Ongoing legislative monitoring of the primary regions of activity
  • Systematic monitoring and analysis of macro-economic scenarii, markets and investment thesis
Strategy

Risks resulting from the definition, implementation and continuation of the group’s guidelines and strategic developments
  • Differing visions or understanding of the assessment of strategic priorities and inherent risks
  • Validity of the parameters underlying investment thesis
  • Geographic or sector concentration of investments
  • Formal decision-making process involving all governance bodies and the management
  • Ongoing monitoring of key performance indicators and regular updates of assumptions and forecasts
  • Periodic portfolio review at different hierarchical levels
  • Investment diversification
Cash and cash equivalents, financial instruments and financing

Risks associated with the management of cash and cash equivalents, financial instruments and financing
  • Access to liquidity
  • Debt leverage and maturity profile
  • Quality of counterparties
  • Interest rate exposure
  • Volatility of derivative instruments
  • Relevance of forecasts or expectations
  • Developments in financial markets
  • Rigorous and systematic analysis of considered transactions
  • Diversification of investments and counterparties
  • Limitation of net indebtedness
  • Definition of trading limits
  • Strict counterparty selection process
  • Formal delegations of authority with the aim to achieve appropriate segregation of duties
  • Systematic reconciliation of cash data and the accounting
Operations

Risks resulting from inadequacies or failures in internal procedures, staff management or systems in place. Risk of non-compliance with quality standards, contractual and legal provisions and ethical norms
  • Complexity of the regulatory environment
  • Adequacy of systems and procedures
  • Exposure to fraud and litigation
  • Retention and development of employees’ skills
  • Internal procedures and control activities regularly reviewed
  • Hiring, retention and training of qualified staff
  • Implementation of delegations of authority to ensure an appropriate segregation of duties
  • Maintenance of and investments in IT systems
  • Internal Code of Conduct and Corporate Governance Charter

 

Portfolio risks

Each of GBL’s strategic investments is exposed to specific risks which, if they were to materialise, could lead to a change in the overall value of GBL’s portfolio, its distribution capacity or its results profile. The bulk (95%) of GBL’s portfolio at year-end 2015 was composed of nine participations in major listed groups which themselves analyse their risk environment. These are described and analysed in their respective management reports and registration documents, available below, in accordance with legislation in force. GBL is also exposed to risks related to its investments carried out through Sienna Capital which nevertheless currently account for 5% of the portfolio value.

 

Imerys

> Dedicated section on Imerys website

LafargeHolcim

> Dedicated section on LafargeHolcim website

SGS

> Dedicated section on SGS website

adidas

> Dedicated section on adidas website

Pernod Ricard

> Dedicated section on Pernod Ricard website

Umicore

> Dedicated section on Umicore website

Total

> Dedicated section on Total website

Ontex

> Dedicated section on Ontex website