APC 2013 Annual Report Download - page 41

OVERVIEW OF THE GROUP'S STRATEGY, MARKETS AND BUSINESSES
RISK FACTORS
Risk Factors 7. 1
As described in Chapter3.9 Internal control and risk information system risks and cyber threats;
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management, Schneider Electric regularly analyses the risks and market risks covering currency risks and raw material price
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threats it faces, which has revealed six major risk categories as fluctuation risks;
follows: legal risks that also cover intellectual property;
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risk factors related to the Group’s business, which also
llitigation and related risks.
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include the solutions business, supplier risks and competitive The Group’s main risks and threats are summarized in a chart
threats; ofoverall risks based on their impact and probability.
industrial and environmental risks that also include risks such
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as natural catastrophes and political disturbances,etc.;
Risk factors related to the Group’s business
Schneider Electric operates worldwide, The growth and success of theGroup’sproducts
incompetitive and cyclical markets depend on our ability toconstantly adapt to and
leverage new technologies to deliver high value
The worldwide markets for the Group’s products are competitive products and solutions.
in terms of pricing, quality of products, systems and services,
development and introduction time for new offers.
The markets in which Schneider Electric operates are experiencing
SchneiderElectric faces strong competitors, some of whom are
rapid evolutions due to the introduction of innovative technologies.
larger than we are or are developing in certain lower cost
In particular, the increased digitization of products and native
countries. The Group is exposed to fluctuations in economic
connectivity to the Web opens numerous new opportunities, but
growth cycles and to the respective levels of investments within
could also allow other players to penetrate our markets. The
the different countries in which we operate. The Group’s
widespread usage of mobile devices creates new expectations
widespread geographic coverage and diversified end markets
from customers as far as the general usability of products. Last but
enable us to ride out downturns on specific markets.
not least, the increased connectivity of products increases the risk
As 43% of the Group’s revenue is generated in emerging
of cyber attacks.
countries, we are exposed to the risks associated with those To meet these challenges, the Group has increased its
markets. investments in the areas of embedded control (hardware and
The Group’s wide international presence exposes us to many software), and cyber-security. A group-wide initiative aims at
economic, legal and political risks in the countries in which we developing common control technologies, leveraging such
operate. These include risks arising from social unrest advances as “controller on a chip”, resulting in extremely
(particularly strikes and walk-outs), political instability, unforeseen competitive products. More and more, the development of
regulatory changes, restrictions on capital transfers and other products goes in parallel with the development of life-cycle
obstacles to free trade, and local tax laws. All of these risks may services, which leverage the Web connectivity to deliver superior
have an adverse effect on the Group’s operations, results or lifetime value to our customers. Such services not only open new
financial position. recurring revenue opportunities for Schneider Electric, but
reinforce the Group’s competitive position versus potential new
Schneider Electric has implemented procedures designed to
entrants.
protect it as far as possible from these risks, which are generally
beyond our control, and to manage them as effectively as The increased software content of its solutions had been the
possible. These procedures include quarterly business reviews in occasion of specific investments in the area of user experience.
which performance and projections are monitored, in terms of The standards and techniques developed for software solutions
activity, action plans, results to date and forecasts, at all apply readily to smart phones and allow development teams to
organizational levels of the Group (see the section entitled seamlessly extend products and solutions with state of the art
“Internal control and risk management”). The Group also has the mobile applications.
necessary competencies to manage these risks, mainly through As far as cyber-security, a specific investment program has been
our central functions (finance, legal, tax and customs). launched to develop specific capabilities. Specialists have been
embedded in the main development teams/centers, who work
from the early phases of the design to make products inherently
safe. A constant monitoring of emerging threats has been
implemented in partnership with specialized firms and specific
incident response processes have been established to support
customers in case of cyber-attack against Schneider Electric
products.
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2013 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC