2007 Interactive Registration Document - Renault

01 RISK
RENAULT AND THE GROUP
FACTORS
1.2 RISK FACTORS ✦
In the course of its business, the Renault group is exposed to a number of
risks that can affect its assets, liabilities and fi nancial performance. These
risks are outlined below. Details on how they are managed can be found in
c hapter 2.3.
1. The Group has commercial and/or industrial operations in countries outside
Europe, notably South Korea, Romania, Brazil, Argentina, Turkey, Colombia,
Chile, Russia, Morocco, India and Iran. These operations account for 25% of
revenues. The main risks are GDP fl uctuations, economic and political instability,
regulatory changes, payment-collection diffi culties, labor unrest, major swings
in interest rates and exchange rates, and currency controls.
2. Risks affecting the quality of its products, which involve a wide variety
of complex technologies, mean that quality is a top priority and that special
attention is paid to the reliability of mechanisms and equipment providing active
and passive safety.
3. Purchases account for a substantial portion of vehicle production costs, so it
is vital for Renault to choose suppliers of the highest caliber, i.e. companies that
are fi nancially fi t, comply with rules and regulations on sustainable development,
deliver high-quality products, and so on. ✦
4. The Group’s exposure to industrial risk is potentially signifi cant because its
industrial operations are highly concentrated and its plants are interdependent.
It is also dependent on its main suppliers.
5. There are three main aspects of environmental risk for Renault:
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environmental impact of malfunctions in its plants,
harm to individuals (personnel and people living near the plants),
past pollution of subsoil and groundwater.
6. Renault depends on the orderly operation of its IT systems. Most of the
Group’s functions and processes rely on the software tools and technical
infrastructure connecting its sites. The main risks pertain to the disruption of
IT services, and the confi dentiality and integrity of data.
7. In terms of product distribution, the type of risks to which Renault is exposed
depends on the distribution channel involved:
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at the commercial import subsidiaries, the main risks are related to
the commercial resources allocated to these fi rms,
at its own distribution subsidiaries, organized under the umbrella of Renault
Retail Group in Europe, the risks are primarily related to the diversity of
these decentralized entities,
for dealerships, the risks arise from the financial health of these
networks.
Further, in connection with its commercial activities, the Group may have to
cope with customer payment defaults.
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8. Automobile operations are naturally exposed to foreign exchange risk through
their industrial and commercial activities. Exchange rate fl uctuations can have an
impact at fi ve levels: operating margin, fi nancial income, income of associated
companies, shareholders’ equity, and net fi nancial debt.
9. The Group is exposed to counterparty risk in its fi nancial-market and banking
transactions, in its management of foreign exchange and interest rate risk, and
in the management of payment fl ows.
10. Because raw materials account for a substantial proportion of vehicle
production costs, the Group is exposed to commodity price risk.
11. Through the sales fi nancing business of RCI Banque, the Group is exposed to
risks arising from the creditworthiness of its customers (consumers , corporates
and dealers).
12. The Group’s 44.3% holding in Nissan Motor Co. Ltd. (“Nissan Motor”),
accounted for by the equity method in its consolidated fi nancial statements,
has a major impact on its fi nancial results.
13. Since the Group generates 51.9% of its sales in the compact and mid-size
vehicle segments, its fi nancial results depend on the success of these two
product lines.
14. The European Commission has issued recommendations for amending
Directive 98/71 on the legal protection of designs and models. These
recommendations call for the abolition of protection of spare parts under design
and model law. If the amended version of the Directive is adopted, it could have
a negative impact on the earnings of the Group.
15. Renault is exposed to a material change in the regulations applicable to
automobiles.
24 Registration Document Renault 2007
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