APC 2011 Annual Report Download - page 36

34 2011 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC
DESCRIPTION OFTHEGROUP, ANDITSSTRATEGY, MARKETS ANDBUSINESSES
1RISK FACTORS
This change will be based on six major areas:
•the functionality of the industrial and logistic process;
•industrial planning;
•reinforcement of skills in the target jobs;
•optimisation of the industrial operation (suppliers, factories,
distribution);
•alignment of the information systems strategy with this
segmentation;
•adaptation of the performance measurement.
Schneider Electric’s plants and products comply with increasingly
extensive and stringent European regulations and with international
standards governing environmental protection in all host countries.
In many cases, the Group anticipates future standards. In 1992,
Schneider Electric defi ned a formal environmental policy, which was
revised in 2004 to take account of changes both inside and outside
the Group. This policy is designed to improve production processes,
promote eco-design, integrate customer expectations into the
Group’s environmental protection approach and raise awareness
among all employees and partners about environmental protection
and energy effi ciency. In order to limit risks related to the environment
generally, the Group has implemented an ISO 14001-compliant
process to continuously improve the environmental performance of
its plants and supply chain centres.
4.4 Global, selective purchasing
Purchases correspond to around 50% of consolidated revenue
and play a crucial role in the Group’s technical and business
performance. The Group has globalised 70% of purchases from
strategic suppliers and aims to increase local sourcing in emerging
markets to more than 50% as part of its programme to re-balance
costs and revenue.
Schneider Electric primarily purchases raw materials such as silver,
copper, aluminium, steel and plastics, as well as components,
electronic products and services. The supplier list includes
international fi rms, as well as many small and medium-sized
companies. Suppliers are selected for their know-how, the quality
of their products and services, their competitiveness, their ability to
support the Group’s globalisation approach and their compliance
with environmental and human rights requirements. As a supporter
of the United Nations’ Global Compact, the Group encourages
suppliers to join as well. A sustainable development agreement sets
out each party’s specifi c commitments.
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5. Risk factors
The Group operates worldwide, in competitive
and cyclical sectors
The worldwide markets for the Group’s products are competitive
in terms of pricing, product and service quality, development and
introduction time and customer service. The Group faces strong
competitors, some of whom are larger or developing in certain
lower cost countries. It is exposed to fl uctuations in the economic
growth cycle and to the respective levels of investments of the
different countries in which it is present. The Group’s widespread
geographic coverage and diversifi ed end markets enable it to ride
downturns on specifi c markets.
As the Group records 39% of its revenue in emerging or developing
countries, it is exposed to the risks associated with those markets.
The Group’s wide international presence exposes it to many
economic, legal and political risks in its host countries.
These include risks arising from social unrest (particularly, strikes
and walk- outs), political instability, unforeseen regulatory changes,
restrictions on capital transfers and other obstacles to free trade,
and local tax laws, all of which may have an adverse effect on the
Group’s business, results of operations or fi nancial position.
Schneider Electric has implemented procedures designed to
protect it as far as possible from these risks, which are generally
beyond its control, and to manage them as effectively as possible.
As described in Chapter 3.10 Corporate Governance, Schneider
Electric regularly analyses the risks and threats it faces, which has
revealed six major risk categories as follows:
•operating risks that also include the « solution» business, supplier
risks and competitive threats;
•industrial and environmental risks that also include risks such as
natural catastrophes and political disturbances;
•computer risks and internet-security threats;
•market risks covering currency risks and commodity price
fl uctuation risks;
•legal risks that also cover intellectual property;
•litigation and related risks.
The Group’s main risks and threats are summaris ed in a chart of
overall risks based on their impact and probability.
Risk factors related to the Company’s business