REGISTRATION DOCUMENT - Bourbon

MANAGEMENT REPORT3Risk factorsConcerning strategic choices, it is possible that certainBOURBON competitors in the offshore oil and gas marineservices activity may decide to develop their market sharein specific geographical regions or with targeted clientsthrough an aggressive commercial policy. The immediateconsequences for BOURBON would be the loss ofnew contracts or renewals in a particular region or for aparticular client.This type of commercial approach would need substantial investment,both by the competitor providing availability of a dedicated fl eet ofvessels corresponding to the needs of clients or of the targetedgeographical region, and by the establishment of a pricing policyconsiderably below the market price. Generally, a targeted attackfrom a competitor is a localized event and diffi cult to sustain overtime as it is limited by operating costs and investments in vessels.Only competitors of a certain size would be able to conduct thistype of policy. Furthermore, current market prices limit the marginsfor maneuver in such price offers, both in terms of the reduction andduration.The fi rst measure of risk management is the detailed monitoring ofthe positioning of our principal competitors’ fl eets and keeping aclose watch on their pricing policy. The second is diversifi cation bothin the geographical positioning of our fl eet and in client diversifi cation,thus limiting the impact of an unexpected targeted attack. Thirdly,BOURBON’s size and policy of investing in the building of vessels inseries at shipyards with optimal costs enable BOURBON to respondaggressively if necessary to such attacks while retaining its marginsfor maneuver.Furthermore, the reinforcement of local teams in areas where ourvessels operate, means more active monitoring of production orexploration vessels. The sales network monitors market trendson a permanent basis and is enhanced by a network of ContractManagers who are in daily contact with our clients so that we canrespond to their requirements in real time.Increased competition and, in particular, the implementation ofaggressive sales and/or pricing policies by some of our competitors,targeting geographical regions where BOURBON has a presence ortargeting some of our existing or potential clients, is likely to resultin BOURBON losing new contracts or failing to renew contracts forcertain geographical regions which may result in a loss of one ormore clients and a reduction in its market share.BOURBON selects a limited number of shipyards for itsnew vessels; hence there is a certain dependence on them.The failure of any of the selected shipyards could reduceBOURBON’s capacity to respond to clients’ requirements.One of BOURBON’s keys to success resides in providing clients withinnovative vessels at competitive prices. BOURBON is developingnew-generation vessel designs (diesel-electric propulsion, class 2dynamic positioning, etc.).In order to benefi t from economies ofscale, the vessels are built in series at competitive shipyards – mostlyin China but also in India, Vietnam, Nigeria and France.A large majority of the commitments have been made with a Chineseshipyard that has demonstrated its capacity to deliver innovative,high-quality vessels (over 100 vessels delivered to BOURBONbetween 2003 and 2011) and whose fi nancial soundness has notbeen called into question to date.The failure of any one of the selected shipyards, or a drop in thequality of the services or products supplied by them, could reduceBOURBON’s capacity to respond to clients’ requirements or couldresult in an increase in related costs, in particular, if failed shipyardshave to be replaced by more expensive service providers. Thesetypes of situations could also have a detrimental effect on theBOURBON’s reputation and image and could have a negative impacton its business, fi nancial position, results and its future outlook.BOURBON’s rapid growth and the structural shortage ofmerchant navy officers could lead to it not being able torecruit sufficiently qualified officers for offshore oil and gasmarine services.BOURBON relies on an international network of shipmanagers andmanning agencies deployed in recruitment pools for qualifi ed offi cersall over the world. In West Africa, a fast-growing region, BOURBONis developing a sustained recruitment and training policy for localseamen.Between 2007 and 2011, BOURBON was, therefore, able to recruitthe human resources needed to man 270 vessels.The Group is continuing its policy of internationalization, backed bylocal management of recruitments and a devolved administrativestructure for its international shipmanagement service.Despite these measures, and due to BOURBON’s rapid growth, thestructural shortage of merchant navy offi cers could lead to it notbeing able to recruit suffi ciently qualifi ed offi cers for offshore oil andgas marine services. This would be likely to lead to operational, andpossibly fi nancial, constraints on the Group.The anticipated expansion of the workforce for the executionof the BOURBON 2015 strategic plan could result in alower standard of Company personnel (less control overBOURBON standards and equipment).The objective of strong growth, professionalization andinternationalization of the workforce led BOURBON to institute,from 2007, a skills management policy for seagoing personneland to invest heavily in a training program tailored to the Group’sstrategic issues.BOURBON - 2011 Registration Document 39