A N N U A L R E P O R T - Bouygues

RISKS
The principle applied within the Group
is to systematically hedge any resithat
it constantly complies with the
regulations in force and implements
the necessary prevention and management
systems.
■ Colas
At Colas, the overall risk management
policy is defined and risk analysis
and assessment are conducted centrally.
For several years now, Colas has
addressed risk management issues
in tandem with its parent company,
which organises regular risk seminars
focusing in particular on the
analysis and prevention of potential
major risks.
Risk measurement, tracking and prevention
are devolved to the most
appropriate level. This arrangement
means that subsidiaries and individual
establishments monitor and manage
the risks to which they are exposed.
Colas does not seem to be greatly
exposed to any particular major risks,
given the nature of its businesses, the
scatter of its establishments and the
large number of projects carried out
each year.
■ Bouygues Immobilier
As a property developer, Bouygues
Immobilier is mainly concerned by site
pollution. In most cases, the company
guards against this risk by requiring
the seller of the land to clean up the
site itself or pay for a clean-up.
When a site includes existing buildings
to be demolished, Bouygues
Immobilier ensures compliance with
asbestos and clean-up regulations
and verifies that the relevant work is
carried out by approved contractors,
guaranteeing that safety rules will be
respected.
In 2005, for the first time, Bouygues
Immobilier experienced a major pollution
incident on a site at Amiens. The
incident caused the company a severe
financial loss and a one-year delay
in delivering the project. Following
the incident, Bouygues Immobilier has
stepped up its risk prevention measures
by systematically engaging consultants
whenever it takes an interest
in a site.
If the consultants’ report raises questions,
a more detailed examination
is requested and the consultants are
asked to draw up a comprehensive
site clean-up programme, fully optimised
in technical, financial and environmental
terms.
MARKET RISKS
Interest rate and
exchange rate risk
Some Group companies use hedging
instruments to limit the impact on
the income statement of movements
in exchange rates and interest rates.
Group policy for using hedging instruments
is described below.
Nature of the Group’s
exposure to risk
■ Exchange rate risk
Broadly speaking, the Group has little
exposure to exchange rate risk in its
ordinary business operations. As far
as possible, the Group seeks to ensure
that when contracts are invoiced in
foreign currencies, the corresponding
outlays are made in the same
currency. This is the case for most
contracts outside France, where the
proportion of expenditure on subcontractors
and suppliers in local
currency is much greater than the
proportion of expenditure in euros.
The Group is also especially attentive
to the risks associated with assets in
non-convertible currencies and, more
generally, to country risk.
■ Interest rate risk
The Group’s financial earnings are not
greatly affected by interest rate movements.
Most of its debt is effectively
fixed-rate, in the form of fixed-rate
bonds and a portfolio of hedging instruments
that transform floating-rate
debt into fixed-rate debt.
On average over the year, variablerate
bank debt on the balance sheet is
less than cash and equivalents invested
in variable-rate instruments.
Fluctuating European interest rates or
a divergence between European interest
rates and those of the main currencies
outside the eurozone would
have little impact on the Group’s
income statement.
Group-wide policies on
hedging instruments
The instruments used by the Group are
limited to the following: for exchange
rate hedges, forward purchases and
sales, currency swaps and currency
options; for interest rate hedges, interest
rate swaps, future rate agreements
(FRAs), caps and floors.
In addition, these instruments:
• are used only for hedging purposes,
• are contracted only with leading
French and foreign banks,
• present no risk of illiquidity in a
downturn.
Specific reporting documents are produced
for the managerial and supervisory
bodies of the relevant companies
concerning the use of hedging instruments,
the choice of counterparties
and interest rate and exchange rate
risk management in general.
Hedging rules
■ Exchange rate risk
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