APC 2012 Annual Report Download - page 41

2012 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 39
OVERVIEW OF THEGROUP’S STRATEGY, MARKETS AND BUSINESSES
1
RISK FACTORS
However, it should be noted that following a request for judicial
review issued by the company ErDF against Schneider Electric
in July 2012 regarding a potential defect designated soft button
(non-reset) affecting connection breakers (DB90) produced
between 1990 and 2010, reliability testing is underway in the
framework of conventional mediation between Schneider Electric
and ErDF. The purpose of this testing is the statistical determination
of the number of DB90s affected by this potential defect, as well as
the product failure rate. The results of the testing, expected at the
start of2013, will orient the decisions concerning the product recall
and how the resulting costs will be assumed. These costs may have
a signifi cant impact on the Group.
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 analyzing the impact of the main risks;
•preventing risks and protecting industrial equipment; defi nition
and dissemination of protection standards for sites against the
risk of fi re and malicious intent, audits of the main sites by an
independent prevention company, roll-out of a self-assessment
questionnaire for the other Group sites;
•drawing up business continuity, in particular for critical sites;
•roll-out of crisis management tools by the Group’s Security
Department;
•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;
•optimization of fi nancing for high frequency, low amplitude risks
through retentions managed either directly (deductibles) or
through captive insurance companies.
Liability insurance
A new insurance program offering coverage and limits in line with the
current size of the Group and its evolving risks and commitments
was established on January1, 2012, for a period of three years.
Certain specifi c risks, such as aeronautic and environmental risk,
are covered by specifi c insurance programs.
Property damage and business interruption
insurance
The global insurance program put in place on July1, 2010 for an
initial duration of two years was renegotiated as of July1, 2012.
This is an “all risks except” contract which covers events that could
affect Schneider Electric’s property (including fi re, explosion, natural
disaster, machinery breakdown) as well as business interruption
resulting from those risks. The limit of indemnity under the global
program is 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 loss
scenarios established by specialists and available capacity in the
insurance sector.
Assets are insured at replacement value.
Shipping and transport insurance
The insurance program that has covered all goods shipments,
including between Group facilities, since2009 continued in2012.
Following a Request for Proposal made in late 2012, this program
will continue in2013 with the same insurer.
Erection all risk insurance
An erection all risk insurance program was set up on April1, 2011 in
order to cover the development of our services and solutions. This
program, which aims to provide cover for damages to work and
equipment for projects taking place at our clients’ premises, was
renewed for one year on April1, 2012.
Other risks
In addition, Schneider Electric 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.