INTRODUCTION TO THE CAPGEMINI GROUP

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2. INTRODUCTION TO THE CAPGEMINI GROUP
protects its networks via security rules and firewalls. It also has
an established IT security policy. For some projects or clients,
enhanced systems and network protection is provided on a
contractually-agreed basis.
Offshoring
Capgemini’s evolving production model, Rightshore ® , involves
transferring a portion of the Group’s production of part of its
services to sites or countries other than those in which the
services are used or in which the Group’s clients are located
and particularly India, Poland, China, Vietnam and Latin
America. The development of this model has made the Group
more reliant on telecommunications networks, which may
increase the risk of business interruption at a given production
site due to an incident or a natural disaster, in so far as several
operational units could be affected simultaneously. The use of
a greater number of production sites provides the Group with a
wider range of options in the event of a contingency.
Environment
As an intellectual service provider, Capgemini’s activities have a
moderate impact on the environment. Nevertheless, the Group
strives to limit the environmental impact of its activities, as
described in the corporate responsibility and sustainability section
(Section 3.5, The Group and the environment). The risks in this
respect are not deemed material.
Clients
Capgemini serves a large client base, in a wide variety of sectors
and countries. The Group’s biggest clients are multinationals and
public bodies. The Group’s largest client, a major British public
body, contributes 10% of Group revenues, while the secondlargest
client accounts for just 2%. The top 10 clients collectively
account for just over 23% of Group revenues, and the top 30
represent just over 37%. The credit-worthiness of these major
clients and the sheer diversity of the other smaller clients help
limit credit risk.
Suppliers and sub-contractors
Capgemini is dependent upon certain suppliers, especially in
its Technology Services businesses. While alternative solutions
exist for most software and networks, certain projects may
be adversely affected by the failure of a supplier with specific
technologies or skills.
Country risks
Capgemini has permanent operations in approximately
30 countries. The bulk of its revenues is generated in Europe and
North America, which are economically and politically stable.
An increasing portion of its production is based in emerging
countries, and primarily India, which now represents
approximately 28% of the Group’s total headcount. Consequently,
Capgemini is now more exposed to the risk of natural disasters in
South East Asia and Latin America, political instability in certain
regions of India and adjoining countries, and even terrorist attacks.
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REFERENCE DOCUMENT 2010 CAPGEMINI
From an economic standpoint, the Group is also exposed to risks
stemming from the negative effects of insufficiently controlled
growth (wage inflation, which is particularly rife in the IT sector,
inadequate domestic infrastructure and higher taxes).
Strict approval criteria must be met before employees are sent to
work in countries where there are no existing Group operations,
and even stricter criteria apply in the event that employees are
sent to countries considered “at risk”.
External growth
External growth transactions, one of the cornerstones of the
Group’s development strategy, also contain an element of risk.
Integrating any newly-acquired company or activity, particularly
in the service sector, may prove to be a longer and more difficult
process than predicted. The success of an external growth
transaction largely depends on the extent to which the Group
is able to retain key managers and employees, maintain the
client base intact, coordinate development strategy effectively,
especially from an operating and commercial perspective, and
dovetail and/or integrate information systems and internal
procedures. Unforeseen problems can generate higher integration
costs and/or lower savings or synergies than initially forecast. If
a material unidentified liability subsequently comes to light, the
value of the assets acquired may turn out to be lower than their
acquisition cost.
Economic conditions
The Group’s growth and financial results may be adversely
affected by a general downturn in the IT service sector or in one of
Capgemini’s other key business segments. A shake-up resulting in
a change of ownership at one of Capgemini’s clients or a decision
not to renew a long-term contract may have a negative effect on
revenue streams and require cost-cutting or headcount reduction
measures in the operational units affected.
LEGAL RISKS
The Group’s activities are not regulated and consequently do
not require any specific legal, administrative or regulatory
authorization.
In the case of some services, such as outsourcing or specific
projects carried out for clients whose activities are regulated,
the Group itself may be required to comply with contractual
obligations related to such regulations.
Draft agreements are submitted to the Legal department for
review when their terms and conditions derogate from the
principles governing the Group’s contractual relations. However,
in spite of the stringent control procedures that the Group
applies regarding the terms and conditions of the agreements to
which it is party, it is impossible to guarantee that all risks have
been contained and eliminated.