Registration Document BOUYGUES

3
Risk factors
Business-specific risks
This is also true of operational functions, which are
organised into different branches, such as legal,
human resources, accounting, management control,
IT systems and purchasing, which are coordinated
by Bouygues Construction departmental
heads. Functional expertise units, handling matters
such as cash management, financial engineering,
taxation and insurance, all provide their services to
all group companies.
The approval and control procedures prepare the
ground for the design and construction processes.
For major projects, there is a systematic monitoring
of project selection and the key risks involved.
The main operational risks are also mitigated
by adequately-staffed project teams that have
the requisite professionalism. This is combined
with managerial experience and active manager
involvement.
In addition, to improve the performance and control
of the design and execution processes described
in the operational unit management systems:
> the major project pre-execution phase is a particular
focus of attention, especially in the design
phase, the drafting of contracts and preparation
of the worksite;
> in the design phase, independent consultants
are used to back up in-house expertise on the
riskiest technical projects;
> regular costing audits are carried out to ensure
a reliable approach in terms of general outlay,
subcontractor budgets and worksite supervision
costs;
> the support functions are systematically mobilised,
in particular for contract management and
purchasing, and those assisting are involved
early on in the process;
> there is increased vigilance of the selection and
overseeing of customers and partners;
> the subcontracting process is tightly-supervised,
with special oversight of major subcontractors
and partnerships before the allocation of
high-stake work packages (architects, technical
trades, etc.);
> risks are appropriately monitored using purposedesigned
tools and procedures. To this end,
some entities have adopted formal risk management
systems specific to the largest projects. At
Bouygues Travaux Publics, the global quality
division manages this process.
In 2011, no significant operational risks materialised.
However, two projects are a focus of special
attention in South Africa (Gautrain project) and
the US (Miami tunnel project). A more detailed
analysis of these cases is given in the claims and
litigation section.
Country risk
Bouygues Construction generates 55% of its business
in France and 77% in OECD countries.
The risks to which the group is exposed outside
these areas are either political, deriving from governmental
actions or decisions taken at the local
level (embargoes, asset seizures or the freezing of
bank accounts), social (general strikes, civil disturbances),
economic or financial (currency devaluation,
currency shortages or a payment default).
Bouygues Construction uses a variety of means to
limit these risks. Thorough investigations are conducted
before prospecting for business in a new
country. It is company policy to suspend commercial
activities in regions with a particularly serious
political risk, and not to prospect for business in
countries presenting the highest risk (in particular
those experiencing serious civil or military unrest,
or subject to United Nations embargoes). The
company also operates preventive legal, financial
and insurance measures, in particular ordering
the systematic cessation of a worksite in a case of
non-payment, preferring multilateral international
financing and procuring political risk insurance
cover whenever it is available on the insurance
market on satisfactory financial terms.
Regularly-updated business continuity plans are
also in place. A key aim of such plans is to safeguard
people. Bouygues Construction ensures
that the guidelines issued by French embassies
are strictly followed in the countries concerned. It
also liaises with the embassies to develop evacuation
plans for various alert levels. In addition, the
group's flexible organisational structures make it
possible, in exceptional circumstances, to withdraw
its resources from countries where such risks
materialise while keeping its losses to a minimum.
The political disturbances that marked 2011 in
many countries had only a limited impact on
company's business and personnel. The most
significant of these upheavals took place as part
of the "Arab Spring". Bouygues Construction has
only limited involvement in this region, other than
Morocco, an adjoining country, and Egypt. In
Egypt, all of the teams working on the Cairo Metro
were repatriated when the crisis was at its height.
The unrest following the presidential election in the
Ivory Coast caused a slowdown in the local activities
of ETDE and disruption in the mining activities
of DTP Terrassement. These events did not prompt
any serious incidents and business has since
resumed as normal, particularly with the revival of
the project to build a third bridge in Abidjan.
Recession-related risk
The public debt crisis and stagnation in the building
and civil works sector is having a significant
impact in many EU countries where Bouygues
Construction generates 68% of its sales. Despite
good business levels, price pressures are being felt
and the group is having to cope with the growing
vulnerability of some of its counterparties.
In Europe, the economic environment is marked
by a reduction in public spending, growing hesitation
by private investors and severe constraints
on project financing transactions. The end of the
housing support programmes and the fall in public
investments are dampening business. Building
and civil works sector growth remained in the
red in 2011.
Like many companies in the industry, Bouygues
Construction is finding it increasing difficult to get
bank financing to secure complex transactions.
Bouygues Construction may at times be faced
with specific problems connected with delays or
the abandonment of some construction projects,
and difficulties in obtaining payment for projects
currently in progress.
Nevertheless, the group has many strengths to
resist and adapt to the economic climate. Its business
diversity and geographical footprint mean
that Bouygues Construction is less sensitive than
a group engaged in a mono-product business or
in a single geographical region.
Bouygues Construction also enjoys a protected
business environment in certain countries or for
some types of activity. This is the case in Asia,
in the countries where business is traditionally
done (Hong Kong, Singapore) but also in Central
America, in Cuba, where a growing tourist industry
BOUYGUES • 2011 Registration Document • RISK FACTORS • 137