ANNUAL REPORT 2011 REGISTRATION DOCUMENT - Saft

2 Risks
RISK FACTORS
related to the market environment and the Group’s activities
Since 2004, the Saft Group has established a risk identifying system through a risk mapping of the major risks to which it is exposed.
The risk mapping, which is updated regularly, ranks all risks identifi ed based on their potential impact, on the probability they will
occur and on an assessment of the level of control for each one of them. The process of evaluating risks is described in the report
prepared by the Chairman of the Supervisory Board, presented hereafter in chapter 4 “Corporate Governance” of this annual report.
Along with the risk mapping, this section describes the signifi cant risks which the Group considers it is exposed to through its activities
and environment, as well as the steps taken to lower the probability of such risks materialising and to reduce their potential impact.
At the time that this Annual Report was prepared, the Company performed a review of risks that could have a material adverse effect
on its business, fi nancial position or results and its ability to achieve its objectives, and it feels there are no risks, other than those
listed below, that the Company deems relevant and meaningful.
2.1 RISKS RELATED TO THE MARKET ENVIRONMENT
AND THE GROUP’S ACTIVITIES
2.1.1 RISKS RELATED TO EXPOSURE TO A
HIGH LEVEL OF COMPETITION AND
PRICE PRESSURE
Types of risks
Certain segments of the Group’s activities are exposed to
competition from low-cost battery producers, mainly in Asia.
The pressure that this competition exerts on prices could force
the Group to reduce its prices, leading to a contraction of its
margins.
Moreover, the possible relocation of some of the commercial or
manufacturing operations of the Group’s customers to Asia or
other lower labour cost countries could lead to these customers
deciding to source their batteries from competitors of the
Group already located in these territories. This could have a
considerable negative impact on the Group’s business and its
results.
Risk management
In order to minimise this risk, the Group prioritises its innovation
strategy, with the aim of differentiating itself from its competitors
in terms of the products it offers, while also seeking to improve
its competitiveness. The Group has therefore implemented an
investment policy in some low-labour cost countries, such as
the Czech Republic, China, India and Brazil, by setting up
commercial units and/or manufacturing facilities there.
2.1.2 RISKS RELATED TO TECHNOLOGIES
USED
Loss of the Group’s competitive advantage in
an environment of fast-changing technological
development
Types of risks
Saft’s business is focused on specialised markets for advanced
technology batteries. Saft holds leading positions in many of
54 / SAFT - ANNUAL REPORT 2011
these markets because it provides high value-added products
based on innovative technologies and its ability to customise
its products in line with the changes in specifi cations of its
customers. However, the batteries market involves rapidly
evolving technology. Therefore, it cannot be ruled out that the
technological advances in the manufacture of batteries will not
affect the competitiveness of the products made by Saft, and
lead to a loss of the competitive advantages currently held by
the Group.
Risk management
To develop and gain access to new technologies, the Group
channels signifi cant resources into Research and Development.
Accordingly, over the last three fi nancial years, the Group has
invested the equivalent of 6.6% in 2009, 7.8% in 2010 and
9.0% in 2011 of its revenue in Research and Development.
Uncertainties with regard to the success of lithiumion
technology
Types of risks
The Group currently develops and sells lithium-ion battery
components and systems, which it considers will enable it
to satisfy a range of requirements in a number of evolving
sectors, notably those regarding storage of renewable energy
and traction batteries. Saft has therefore invested in the
construction of a manufacturing plant for lithium-ion batteries
and components in Jacksonville, Florida (USA).
The Group cannot guarantee that this technology will be a
success, and it cannot be ruled out that different technologies
will meet the same needs. Thus, some companies have recently
developed batteries using emerging technologies that are likely
to be in competition with the lithium-Ion technology developed
by the Group.
Risk management
In the context of the ongoing development of this technology,
the Group has established a multi-year plan to launch a
second generation of lithium-ion on the market. In addition,
it is pursuing Research and Development work in other