APC 2014 Annual Report Download - page 37

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 management, information system risks and cyber threats;
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Schneider Electric regularly analyses the risks and threats it faces, market risks covering currency risks and raw material price
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which has revealed six major risk categories as follows: fluctuation risks;
risk factors related to the Group’s business, which also include
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legal risks that also cover intellectual property;
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the solutions business, supplier risks and competitive threats; litigation and related risks.
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industrial and environmental risks that also include risks such as
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The Group’s main risks and threats are summarized in a chart
natural catastrophes and political disturbances,etc.; ofoverall risks based on their impact and probability.
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 its ability toconstantly adapt to and
leverage new technologies to deliver high value
The worldwide markets for the Group’s products are competitive in
products and solutions
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 countries. such as IoT and Big Data. Customers expect smarter and smarter
The Group is exposed to fluctuations in economic growth cycles products with open interfaces enabling them to be tightly
and to the respective levels of investments within the different integrated into more and more complex software based solutions.
countries in which we operate. The Group’s widespread The resulting digitization of products, including native Web
geographic coverage and diversified end markets enable us to ride connectivity opens numerous new opportunities, but will also
out downturns on specific markets. accelerate the convergence of IT and OT technologies, thus
making it possible for new players to enter our markets. The
As 44% of the Group’s revenue is generated in emerging widespread usage of mobile devices creates new expectations
countries, we are exposed to the risks associated with those from customers as far as the general usability of products. Last but
markets. not least, the increased connectivity of products increases the risk
The Group’s wide international presence exposes us to many of cyber attacks.
economic, legal and political risks in the countries in which we To meet these challenges, the Group has increased its investments
operate. These include risks arising from social unrest (particularly in the areas of embedded control (hardware and software), and
strikes and walk-outs), political instability, unforeseen regulatory cyber-security. A Group-wide initiative aims at developing common
changes, restrictions on capital transfers and other obstacles to control technologies, leveraging such advances as «controller on a
free trade, and local tax laws. All of these risks may have an chip», resulting in smart and open products that are «natively»
adverse effect on the Group’s operations, results or financial secure. More and more, the development of products goes hand
position. in hand with the development of life-cycle services leveraging Web
Schneider Electric has implemented procedures designed to connectivity to deliver superior lifetime value to our customers.
protect it as far as possible from these risks, which are generally Such services not only open new recurring revenue opportunities
beyond our control, and to manage them as effectively as possible. for Schneider Electric, but reinforce the Group’s competitive
These procedures include quarterly business reviews in which position versus potential new entrants.
performance and projections are monitored, in terms of activity, The increased software content of the Group’s solutions has
action plans, results to date and forecasts, at all organizational resulted in specific investments in the area of user experience. The
levels of the Group (see section 3.9Internal control and risk standards and techniques developed for software solutions apply
management). The Group also has the necessary competencies to readily to smart phones and allow development teams to
manage these risks, mainly through our central functions (finance, seamlessly complement products and solutions with state of the
legal, tax and customs). art mobile applications.
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2014 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC