2020 Registration document: Risk factors and internal control

6

Risk factors

and management

1. / Risks related to changes in the economic model
2. / Security risks
3. / Regulatory risks
4. / Financial risks

	6.5/	Risk management associated
354		with the Covid-19 health crisis	367
361	6.6 /	Insurance	368
363	6.7 /	Risk management	370
	6.7.1 /	The risk management system	370
365	6.7.2 /	Risk mapping	378

6

2020 UNIVERSAL REGISTRATION DOCUMENT			FNAC DARTY 351

6  RISK FACTORS AND MANAGEMENT 



The Group operates in a constantly changing environment and is therefore exposed to both external and internal risks in developing its activities relating to its strategic plan. Moreover, the Group has conducted a review and assessment of the risks that could potentially have a material adverse impact on its activities, its financial position, its net assets, its income, its ability to achieve its objectives, its image and its reputation. This chapter set outs the main risks identified to which the Group considers itself to be exposed, as well as the internal control and risk management procedures implemented to prevent, manage and mitigate these risks. The risk mapping was presented and approved at the Audit Committee meeting in December.

The most substantial risk factors within each category are presented first. The importance of each risk is calculated as at the date of this document, based on an assessment of the estimated level of impact of the risk and the likelihood of its occurrence.

Main risks identified to which the Group considers itself to be exposed

▼

Risks related to changes	IT agility and Group transformation	354
in the economic model	Relations with suppliers	355
	Ability to enhance our organizational efficiency	356
	Integration of social and environmental responsibility issues	357
	Damage to the brand image of Group banners	358
	Development of the service model	359
	Growth in transactional activities	359
	Talent management	360
Security risks	Cyber-attacks and security	361
	Confidentiality of key strategic, commercial, social and legal information	362
Regulatory risks	Compliance with various regulations	363
	Balanced use of data	364
Financial risks	Liquidity risk	365
	Pension plan	366
	Change in the Group's capital structure	366

352 2020 UNIVERSAL REGISTRATION DOCUMENT			FNAC DARTY

RISK FACTORS AND MANAGEMENT 



Likelihood

Changes in the	Ability to enhance
our organizational efficiency
capital structure
	Incorporation of CSR issues	IT agility
Development	and Group transformation
of the service model
Growth in		Cyber-attacks and security
transactional activities	Damage to the brand image
	of Group banners
	Compliance with	Supplier relations
	various regulations
Talent management
Balanced use of data
Confidentiality of commercial,	Liquidity risk
social and legal information

Pension plan

Impact

6

2020 UNIVERSAL REGISTRATION DOCUMENT			FNAC DARTY 353

6  RISK FACTORS AND MANAGEMENT  Risks related to changes in the economic model

6.1 / Risks related to changes in the economic model

Against the backdrop of the crisis, Fnac Darty needs to persist with transforming its omnichannel model by continuing to adapt its organization and investing in IT systems and operational resources. Product and service lines must continue to be updated to achieve a better fit with changing consumer behaviors. However, the Group strives to balances its investments so as to maintain the profitability of its economic model, and keeps a close eye on developments and the economic outlook.

Risks related to changes to the economic model - IT agility and Group transformation

▼

Risk identification	Risk management
Fnac Darty's ambition, as expressed through its strategic plan and	The governance for a three-year master plan was set up in 2018
the multiplication of the Group's growth drivers (its online platforms,	and updated at the end of 2020. This master plan is sponsored at
Marketplace, development of the franchise, partnerships, etc.),	Executive Committee level in close collaboration with the business
requires the successful transformation of its information systems	lines and its main measures include:
to enable them to support the Group's transformation and be agile		the monthly monitoring of key issues and investment strategies
in its various projects.	""
		at Executive Committee level;
Some applications used by the Group need to be updated to	"" the rollout of agile development, particularly in the Digital
improve the customer experience and strengthen operational
continuity during busy periods. There is a lack of standardization		Factory project, aims to create omnichannel and omni-brand IT
across the applications used by the Group's various entities.		functionality in France. The creation of combined IT and business
		teams to help improve the efficiency of production launches and
Moreover, the Group may fail to deliver this transformation		to mitigate the associated risks;
successfully, both in terms of its capacity and its speed of execution.	"" the insourcing of key IT resources, enabling control of core
		business components over time and facilitating the success of
		the plan to converge the Fnac and Darty IT systems;
	""	strengthening the continuity of service arrangements for the most
		critical applications in place, including handling the obsolescence
		of end-of-life applications;
	""	the use of public cloud resources to provide faster support for
		new business strategies (subscription, CRM, data sharing &
		advertising, ramp-up of online sales).

354 2020 UNIVERSAL REGISTRATION DOCUMENT			FNAC DARTY

RISK FACTORS AND MANAGEMENT 

Risks related to changes in the economic model 

Risks related to changes in the economic model - Relations with suppliers

▼

Risk identification

Risk management

Fnac Darty offers a wide range of products and is supplied by a The Group's sales policy is designed to develop strategic large number of suppliers. In France, in particular, purchases from partnerships with suppliers, partners and contractors in its primary the top twenty suppliers represented around 60% of the total markets:

purchases made in 2020.

"" align our interests and suppliers' interests around the value
A major portion of the Group's operations depends on its capacity	strategy, with its opportunities and constraints, by entering
to negotiate under good conditions and maintain contracts and	into partnerships that shape the entire relationship (purchasing,
long-term business relations with its suppliers, especially those	communication, merchandising, demonstrations, etc.);
for whose products there is no substitute as far as customers	ad-hoc structures with a specific governance system have been
are concerned (e.g. Samsung, Apple, Microsoft, Sony, etc.). Any ""
deterioration in the banners' relationships with their main suppliers,	implemented with the aim of rebalancing our relations with our
the imposition of stricter conditions by suppliers, or the non-renewal	suppliers:
or early termination of their main supply or service agreements may	""	introduction of a 'hybrid' mode of operation which
have a material adverse effect on the Group's image, operations,
	links buyers to product categories and provides central
earnings, financial position and outlook.
	coordination,
Furthermore, any significant failure, deterioration, sudden	""	creation of a purchasing & policies department to define
termination or non-renewal of the Group's contractual relationships
	purchasing policy, coordinate and manage buyers, and
with its partners and contractors could have a material adverse
	monitor and formalize policies,
effect on the Group's image, operations, earnings, financial position
and outlook.	""	integration of the scope of the France and international
		Purchasing Departments (management of European
		contracts) is in progress,
	""	separate management of the Services area by a specific
		Services Department;
""	offer developments to the services delivered to our suppliers
	through data supply and to the customer's experience online
	and in store;

"" agreements with suppliers are periodically negotiated in
accordance with local laws and regulations and the Business	6
Code of Conduct (appended to supplier contracts).

2020 UNIVERSAL REGISTRATION DOCUMENT			FNAC DARTY 355