APC 2012 Annual Report Download - page 35

2012 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 33
OVERVIEW OF THEGROUP’S STRATEGY, MARKETS AND BUSINESSES
1
RISK FACTORS
5.4 Purchasing: selection and internationalization
Purchasing corresponds to around 50% of consolidated revenue
and plays a crucial role in the Group’s technical and business
performance. As part of its program to optimize Purchasing, the
Group has sought to source a signifi cant portion of its purchases
from the top-performing suppliers (“recommended” suppliers) and
aims to increase local sourcing in the new economies to more
than50%.
Schneider Electric primarily purchases prefabricated
components, raw materials (silver, copper, aluminum, steel and
plastics), electronic and electrical products and services. The
supplier list includes multinationals as well as small, medium and
intermediate-sized companies.
Suppliers are selected for the quality of their products and services,
their adherence to delivery deadlines, their competitiveness, their
expertise, their innovative capacity and their commitment to
corporate social responsibility (CSR). As a signatory to the United
Nations’ Global Compact and in view of its recommendation of
ISO26000 to its principal suppliers, Schneider Electric encourages
its suppliers to join this sustainable development process and its
continuous improvement.
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6. Risk Factors
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:
•risk factors related to the Group’s business, which also include
the solutions business, supplier risks and competitive threats;
•industrial and environmental risks that also include risks such as
natural catastrophes and political disturbances, etc.;
•information system risks and cyber threats;
•market risks covering currency risks and raw material price
fl uctuation risks;
•legal risks that also cover intellectual property;
•litigation and related risks.
The Group’s main risks and threats are summarized in a chart
ofoverall risks based on their impact and probability.
Risk factors related to the Group’s business
Schneider Electric operates worldwide,
incompetitive and cyclical markets
The worldwide markets for the Group’s products are competitive
in terms of pricing, quality of products, systems and services,
development and introduction time for new offers. SchneiderElectric
faces strong competitors, some of whom are larger than we are
or are developing in certain lower cost countries. The Group is
exposed to fl uctuations in economic growth cycles and to the
respective levels of investments within the different countries in
which we operate. The Group’s widespread geographic coverage
and diversifi ed end markets enable us to ride out downturns on
specifi c markets.
As 41% of the Group’s revenue is generated in emerging countries,
we are exposed to the risks associated with those markets.
The Group’s wide international presence exposes us to many
economic, legal and political risks in the countries in which we
operate. 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 these risks may have an adverse
effect on the Group’s operations, results or fi nancial position.
Schneider Electric has implemented procedures designed to
protect it as far as possible from these risks, which are generally
beyond our control, and to manage them as effectively as possible.
These procedures include quarterly business reviews in which
performance and projections are monitored, in terms of activity,
action plans, results to date and forecasts, at all organizational levels
of the Group (see the section entitled “Internal Control and Risk
Management”). The Group also has the necessary competencies to
manage these risks, mainly through our central functions (fi nance,
legal, tax and customs).
The protection provided by these measures may nevertheless
prove to be inadequate.