APC 2011 Annual Report Download - page 42

40 2011 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC
DESCRIPTION OFTHEGROUP, ANDITSSTRATEGY, MARKETS ANDBUSINESSES
1RISK FACTORS
Schneider Electric was also among 2,000 companies based all
over the world that were mentioned in the Volcker report on the
Oil for Food programme published by the UN in October2005.
It was investigated by the French judicial system in 2010 with
regard to this report, which stated that the Group had entered into
agreements with Iraqi government between 2000 and 2004, under
which surcharge payments are alleged to have been made to the
Iraqi government of around USD450,000, violating the provisions of
the embargo in force at that time.
Various other claims, administrative notices and legal proceedings
have been fi led against the Group concerning such issues as
contractual demands, counterfeiting, risk of bodily harm linked to
asbestos in certain products and work contracts.
Although it is impossible to forecast the results and/or costs of
these proceedings with certainty, Schneider Electric considers that
they will not, by their nature, have signifi cant effects on the Group’s
business, assets, fi nancial position or profi tability. The Company
is not aware of any other governmental, court or arbitration
proceedings, which are pending or which threaten the Company,
that are liable to have or, during the last 12 months have had, a
material effect on the fi nancial position or earnings of the Company
and/or the Group.
Insurance
Schneider Electric’s strategy for managing insurable risks is
designed to defend the interests of employees and customers and
to protect the Company’s assets, the environment, employees,
customers and its shareholders’ investment.
This strategy entails:
•identifying and quantifying the main areas of risk;
•preventing risks and protecting industrial equipment; having
audits carried out at critical industrial sites by an independent
prevention company, self-evaluation of risks for the other
Groupsites;
•organising and deploying business continuity plans and crisis
management resources, notably for health risks such as
pandemics, technical and political risks and natural disasters;
•carrying out hazard and vulnerability studies and safety
management for people and equipment;
•maintaining the necessary insurance cover for the main risks
facing Group companies under global programs. The Group
carefully screens insurance and reinsurance companies and
evaluates their solvency.
In addition, the Group has taken out specifi c cover in response to
certain local conditions, regulations or the requirements of certain
risks, projects and businesses. To extend guarantees and reduce
budgets, the Group coordinates purchasing of local cover.
Liability insurance
The integrated global liability insurance plan set up in 2007 was
continued until December 31, 2011. A new insurance plan was
put in place on January1, 2012 with a new lead insurer providing
suitable terms and limits for the current size of the Group and the
changes in its risks and agreements.
Certain specifi c risks, such as aeronautic or environmental risk, are
covered by specifi c programs.
Property damage and business interruption
insurance
The global insurance plan put in place on July1, 2010 for an initial
duration of two years has been extended until June30, 2013. This
is an “all risks except” contract which covers events that could
affect Schneider Electric’s property (notably fi re, explosion, natural
disaster, machinery breakdown) as well as operating losses resulting
from the risks. Settlements under the global plan are capped at
EUR350million per claim and specifi c limits apply to certain risks,
such as natural disasters and machinery breakdown. These limits
were determined on the basis of scenarios of loss established by
specialists and available capacity in the insurance sector.
Assets are insured at replacement value.
Shipping and transport insurance
On January 1, 2009, Schneider Electric implemented a new
global shipping/transport insurance program that covers all goods
shipments, including between Group facilities, by all means of
transport, with a maximum insured value of EUR15.2 million
per convoy. This plan was continued in 2011 was renewed on
January1, 2012.
Erection all risk insurance
An erection all risk insurance plan was set up on April 1, 2011
in order to cover the development of our services and solutions.
Thisplan aims to provide cover for damages to work and equipment
for projects taking place at our clients’ premises.
Self insurance
To optimise costs, Schneider Electric self-insures certain frequent
risks through two captive insurance companies:
•outside North America, a captive reinsurance company based in
Luxembourg offers damage and civil liability coverage capped at
EUR10million per year;