INTRODUCTION TO THE CAPGEMINI GROUP

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2. INTRODUCTION TO THE CAPGEMINI GROUP 2 2.7 The Group’s investment policy After performing only a few transactions in 2009, the Group resumed its external growth policy in 2010, with an upturn in both volume and amount. The adopted strategy consisted in strengthening the Group’s presence in emerging countries, consolidating its leading position in certain high potential industries and finally acquiring companies possessing specific expertise in their market sector. The Group’s main transaction in 2010 was the acquisition of a controlling 56.06% stake in the Brazilian IT services company, CPM Braxis. Completed in September, this transaction enabled the Group to strengthen its position in the largest IT services market in Latin America, a market which has also enjoyed the highest growth rate in the region over the last five years. Thanks to this transaction, the Group extended its client base and will be better able to assist its international clients in their expansion activities in Brazil. CPM Braxis has a diversified business portfolio in applications development and maintenance and infrastructure management. Capgemini holds a call option for the remaining share capital of CPM Braxis which may be exercised between years three and five, while the other shareholders hold put options covering their residual investments which may be exercised under the same conditions. 24 REFERENCE DOCUMENT 2010 CAPGEMINI The Group also performed a number of targeted acquisitions to strengthen its traditional businesses. These transactions primarily focused on the financial sector, with the acquisition of the remaining share capital of the UK-based company, Strategic System Solution, in which the Group already held a minority interest, the Indian company Thesys and the French company Plaisir Informatique. Thanks to the acquisition of the Swedish e-purchasing solutions provider, IBX, the Group was the first in the market to offer an integrated solution for the management of the corporate procurement function. Another acquisition in the Nordic countries, the Swedish company Skvader, enabled the Group to strengthen its Smart Energy Services line. Finally, Sogeti was strengthened by two targeted acquisitions in the Netherlands and the United States. In 2011, the external growth policy will hold the cap set in 2010, thereby satisfying the Group’s ambitions in terms of geographical coverage and technological portfolio development, with continuing focus on our presence in emerging countries. These acquisitions will be possible thanks to the Group’s very solid financial position, which they should not comprise.
CAPGEMINI REFERENCE DOCUMENT 2010 2.8 Risk analysis IDENTIFICATION OF RISKS Group Management has discussed, drafted, approved and distributed a set of rules and procedures known as the “Blue Book”. Compliance with the Blue Book is mandatory for all Group employees. The Blue Book restates and explains Capgemini’s seven core values, sketches out the overall security framework within which the Group’s activities must be conducted, and finally, describes the methods to be followed in order to exercise the necessary degree of control over the risks identified in each of the Group’s main functions. Individual business units supplement the Blue Book by drawing up detailed internal control procedures which comply with the relevant laws, regulations and customary practices in the country where they operate, in order to exercise control more effectively over risks specific to their local market and culture. These rules and procedures are updated regularly to reflect the development of the Group’s business activities and changes in its environment. The Internal audit function independently assesses the effectiveness of these internal control procedures given that, irrespective of how well they are drafted and how stringently they are applied, these procedures can only provide reasonable assurance - and not an absolute guarantee – against all risks. RISKS RELATED TO OPERATIONS Capgemini is a service provider, and as such, the main risks to which the Group is exposed are (i) failure to deliver the services to which it has committed; (ii) failure to deliver services within the contractual timeframe and to the required level of quality; or (iii) infringement, notably through human error, of obligations liable to affect the operations of a client or third party. Risks concerning project performance Contracts are subject to a formal approval procedure prior to signature, involving a legal review and an assessment of the risks relating to the project and to the terms of performance. The authority level at which the contract is approved depends on the size, complexity and risk profile of the project. The Group Review Board examines the projects with the most substantial commercial opportunities or specific risk exposures, as well as proposals for strategic alliances. Capgemini has developed a unified set of methods known as the “Deliver” methodology to ensure that all client projects are performed to the highest standards. Project managers are given specific training to develop their skills and acquire the appropriate level of certification for the complexity of projects assigned to them. The Group also has a pro-active policy of seeking external certification (CCM, ISO, etc.) for its production sites. Contract performance is monitored using Group-defined management and control procedures, and complex projects are subject to dedicated control processes. Internal Audit checks that 2. INTRODUCTION TO THE CAPGEMINI GROUP project management and control procedures are being properly applied. Expert teams may also intervene at the request of the Group’s Production and Quality department to investigate projects that have a high risk profile or that are experiencing difficulties. Despite the formal approval procedure for all client project commitments undertaken by the Group, in some cases, difficulties with respect to project performance and/or project costs may have been underestimated at the outset. This may result in cost overruns not covered by additional revenues, especially in the case of fixed-price contracts (which make up approximately half of the Group’s business) or reduced revenues without any corresponding reduction in expense in the case of certain outsourcing contracts where there is a commitment to provide a certain level of service. The Group may provide a performance and/or a financial guarantee for certain large contracts. Some of these guarantees, concerning a very restricted number of clients whose projects represented approximately 15% of Group revenues in 2010, are not for fixed amounts. Despite the stringent control procedures that the Group applies in the project performance phase, it is impossible to guarantee that all risks have been contained and eliminated. In particular, human error, omissions, and infringement of internal or external regulations or legislation that are not, or cannot be identified in time, may cause damage for which the Company is held liable and/ or may tarnish its reputation. Reputation Intense media coverage of any difficulties encountered, especially on large-scale or sensitive projects, could negatively impact the Group’s image and credibility in the eyes of its clients, and by extension, its ability to maintain or develop certain activities. Employees Capgemini’s production capacity is mainly driven by the people it employs, and the Group attaches great importance to developing and maintaining its human capital. The inability to recruit, train or retain employees with the technical skills required to satisfy its client project commitments could impact the Group’s financial results. The Group pays close attention to internal communication, diversity, equality of opportunity and good working conditions. Group Management has published a Code of business ethics and oversees its application. Nevertheless, in the event of an industrial dispute or non-compliance with local regulations and/ or ethical standards, the Group’s reputation and results could be adversely affected. Information systems Capgemini’s operations have little dependency on its own information systems. The systems used to publish the Group’s consolidated financial statements comprise a specific risk in view of the strict reporting deadlines. The Group is aware of the importance of internal communication network security, and 25 2
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INTRODUCTION TO THE CAPGEMINI GROUP

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