Vilmorin & Cie - Annual report 2017-2018

1 ANNUAL REPORT Vilmorin & Cie 51 2017-2018 1.7. Risk factors PRESENTATION of Vilmorin & Cie 1.7. Risk factors 1.7.1. Risk management organization Through its business activities and its locations, Vilmorin & Cie is exposed to risks of different natures (strategic, operational and financial). Risk management is an integral part of the global strategy at Vilmorin & Cie, which is pursuing the construction and permanent improvement of its organization in this respect. The Governance, Risk, and Compliance Department (G.R.C.) ensures that a coherent and effective system for controlling activities exists at group level. It coordinates the identification of major risks and plans on how to deal with them, as well as the resulting process improvements. It also ensures compliance with laws and regulations. As a coordination and control function, it includes the following departments: legal affairs, risks and insurance, safety and security, and product quality. It provides both the General Management and operational entities with expertise and support in adapting to the increasingly stringent market requirements, in terms of governance, transparency and compliance, as well as crisis management. During fiscal year 2017-2018, the G.R.C. Department, relying on its internal network and the use of its new Risk Management Information System (RMIS), relooked at the risk management approach with greater involvement of all Vilmorin & Cie's operational entities. The Business Unit risk coordinators worked with the group's risk experts and the heads of their entities to update the risk identification. These were then evaluated and prioritized with the operating committees. This iterative approach has contributed to the development of a “risk culture” in all Vilmorin & Cie entities and has provided a complete picture of risk perception in the company. An essential support for a homogeneous approach and methodology for risk management, the RMIS has been deployed in Vilmorin & Cie's Business Units. Risk maps were drawn up in the RMIS for each Business Unit, and then a consolidation step was carried out to obtain an overall risk map for Vilmorin & Cie. The different risks were assessed on the basis of their likelihood and impact, taking into account financial, operational, human, regulatory, ethical and image criteria. In conjunction with the Company’s overall risk management approach, compliance projects have been carried out by the G.R.C. Department. A working group has been set up to ensure compliance with the general data protection regulation. In view of the Sapin II law in France, a mapping of corruption risks was carried out, determining the measures to be implemented in line with the other requirements of the law: code of conduct, third party evaluation, disclosure system, etc. Governance of the risk management system is described in the management report (cf. page 92). Vilmorin & Cie's 2018-2019 internal audit plan was based on the risk mapping carried out during fiscal year 2017-2018 to identify priority topics and processes to be examined. In the coming fiscal year, Vilmorin & Cie plans to continue the deployment of group guidelines on the treatment of major risks and to strengthen internal control in the areas concerned. Based on the mapping carried out in 2017-2018, the main risk factors to which Vilmorin & Cie believes it is exposed, which it considers significant or liable to become so, on the date of the present Annual Report, are described hereafter. Other risks – which Vilmorin & Cie is not aware of on the date of this Annual Report or which it does not consider to be significant on this same date, and which might have a negative effect on Vilmorin & Cie – might exist. 1.7.2. Risks related to Vilmorin & Cie’s strategy 1.7.2.1. Risks related to markets and the geopolitical environment Risks of economic or geopolitical disruption in certain regions where the Company is present Identification of the risk Vilmorin & Cie is present in 48 countries and has sales in nearly 150 countries. It operates in areas and countries where economic or geopolitical disruptions may occur. The marketing of seeds, subject to specific regulations and directly linked to the question of food resources, can take on a strategic aspect locally and represent a significant part of the economy of the geographical area concerned. Local authorities may decide to implement policies that form a constraint for a foreign investor: exchange controls, protection of intellectual property rights, restrictions on company ownership, local debt, repatriation of flows and capital invested, or even nationalization of agriculture. Elements of instability disrupting the functioning of a state (war, revolution, major social conflicts) or affecting the financial situation of agriculture and farmers (devaluation, drying up of farmers' funding, etc.) could temporarily compromise Vilmorin & Cie's capacity to pursue its sales, production and research activities in a given region.