Ubisoft 2016 Annual Report Download - page 48

Governance, risks, riskmanagement andinternalcontrol
3Report of the Chairman of the Board of Directors on corporate governance, internal control andriskmanagement
March 31, 2016, the Group had a €250 million syndicated loan,
€12 million in loans, €60 million in bilateral credit lines and other
bank credit facilities totaling €78 million, and had issued €60 million
in bonds, a Schuldschein loan for €200 million, and €15 million in
commercial paper (as part of a program for a maximum amount
of €300 million).
The Group’s liquidity risk is mainly induced by payment fl ows on
derivatives and is therefore not material.
Interest-rate risk
Interest-rate risk is mainly incurred through the Group’s interest-
bearing debt. This debt is essentially euro-denominated and centrally
managed. Interest-rate risk management is primarily designed to
minimize the cost of the Group’s borrowings and reduce exposure
to this risk. For this purpose, the Group uses primarily fi xed-rate
loans for its long-term fi nancing needs and variable-rate loans to
fi nance specifi c needs relating to increases in working capital during
particularly busy periods.
As at March 31, 2016, the Group’s debt included bonds, a
Schuldschein loan, loans, commercial paper and bank overdrafts,
which were essentially used to fi nance the signifi cant year-end
working capital requirements relating to the highly seasonal nature
of the business.
The sensitivity of debt to a change in interest rates is described in
Note 15 to the consolidated fi nancial statements.
COUNTERPARTY RISK
The Group is exposed to counterparty risk – mostly banking-
related – in the course of its fi nancial management. The aim of the
Group’s banking policy is to focus on the creditworthiness of its
counterparties and thus reduce its risks.
RISK TO THE COMPANY’S SHARES
In accordance with its share buyback policy and under the
authorization granted by the General Meeting, the Company may
decide to buy back its own shares. The fl uctuations in the price of
shares bought in this way have no impact on the Group’s results.
In the consolidated fi nancial statements, own shares are deducted
from equity at cost of sale.
As at March 31, 2016, the Company held 3,647,838 own shares with
a value of €80,992 thousand.
The shares are currently assigned to the following objectives:
♦
market-making and liquidity of Company shares under an
agreement signed with Exane BNP: these purchases are made
under the terms of a market-making agreement that complies
with all applicable regulations, and are designed to ensure the
liquidity of purchases and sales of shares. The Company has
allocated €1.5 million for the implementation of this agreement;
♦ cancellation under legally prescribed conditions;
♦ retention for delivery at a later date in exchange or as payment
for external operations; and/or
♦ employee stock ownership.
❙ 3.1.3 INTERNAL CONTROL AND RISK
MANAGEMENT
This section is based on information and control methods reported
by the various parties involved in internal control within Ubisoft
and its subsidiaries, as well as the internal audit work performed
at the request of the general management.
3.1.3.1 Defi nition and objectives of internal
control and risk management
DEFINITION OF INTERNAL CONTROL
Ubisoft has drawn up this section in accordance with the reference
framework of the AMF (initially published in January 2007,
and updated and revised in July 2010) and the principles of the
application guide. The Group also uses this reference framework
to improve its internal control procedures.
Under this framework, internal control is defi ned as a system
designed to ensure:
♦ compliance with laws and regulations;
♦
application of the instructions and policies set down by the
general management;
♦
proper functioning of the Company’s internal processes,
particularly those involving the security of its assets;
♦ reliability of the fi nancial information published.
With a view to achieving each of these objectives, Ubisoft has
defi ned and implemented its general principles of internal control
that, for the most part, are based on the guidelines set out in the
COSO (Committee of Sponsoring Organisation of the Treadway
Commission) report published in 1992 and updated in 2013, as well
as on the internal control reference framework and recommendations
published by the AMF.
This system also aims to help the Company maintain control over
its activities, the effi ciency of its operations and effi cient use of
its resources, while enabling it to adequately take into account
signifi cant operational, fi nancial or compliance risks. Therefore,
the internal control system plays a key role in conducting and
monitoring its activities.
Since 2007, Ubisoft has used a proactive approach in order to
continuously assess the adequacy and effectiveness of its internal
control system. The internal control system has continued to adapt to
the constraints and specifi c features of the Group and its subsidiaries,
and to changes in its external environment. The creation of an Audit
Committee on November 20, 2013 strengthened this approach.
However, the Group is aware that the internal control system cannot
provide an absolute guarantee that the Company’s objectives will
be met and that all the potential risks it may face will be controlled.
DEFINITION OF RISK MANAGEMENT
Risk management is a tool for Company management that serves to:
♦
create and preserve the value, assets and reputation of the
Company;
- Registration Document 2016
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