CONTENTS - Capgemini

32 ANNUAL
THE GROUP
Capgemini
The provisions set aside to cover risks relating to project execution
are analyzed in Note 20 – “Current and non-current provisions”.
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 execute
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 Senior Management has published a code of 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 system
Capgemini’s operations have little dependency on its own information
systems, which are managed via a predominantly decentralized
structure. The systems used to publish the Group’s consolidated
financial statements comprise a specific risk in view of the strict
filing deadlines. The Group is sensitized to the security of internal
communication networks, and protects them 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 TM , involves
transferring a portion of the Group’s production of services to
sites in countries other than those in which the services are
used or in which the Group’s clients are located, particularly
in India, Poland and China. The development of this model
has made the Group more dependent 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 Chapter 7.5 – “The Group and the environment”. The
risks in this respect are not deemed material.
REPORT 2006 Capgemini
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 public body, contributes
15% of Group revenues, while the second-largest client
accounts for just 3%. The top 10 clients collectively account for
31% of Group revenues, and the top 30 a little under 44%. The
creditworthiness of these major clients and the diversity of the
others 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 risk
Capgemini has permanent operations in approximately 30 countries.
The bulk of its revenues are generated in Europe and North
America, which are economically and politically stable.
The recent acquisition of Kanbay has greatly boosted the Group’s
Indian operations, which now rank second only behind France
in terms of headcount. Consequently, Capgemini is now more
exposed to the risk of natural disasters in South East Asia, political
instability in certain regions of India and adjoining countries, and
even terrorist attack. From an economic standpoint, the Group
is also exposed to risk stemming from the negative effects of
uncontrolled growth (wage inflation, particularly 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 operations, one of the cornerstones of Group
development strategy, also contain a large element of risk. Integrating
a newly-acquired company, particularly in the service sector,
may prove to be a longer and more difficult process than predicted.
The success of an external growth operation 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
additional 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.