Carrefour - 2017 Registration Document

MANAGEMENT’S DISCUSSION AND ANALYSIS AS OF DECEMBER 31, 2017 Risk management 2017 REGISTRATION DOCUMENT | CARREFOUR 4. 194 Changes in the industry and the competitive environment Highly exposed to changes in consumer behaviour in a world of changing technology, the mass retail industry is characterised by intense competition, with saturated markets in Europe and relatively constrained margins. This drives constant, rapid changes within the industry that may impact the Group’s operations and performance. Furthermore, the retail market is evolving rapidly due mainly to the development of online shopping and changes in consumer behaviour. E-commerce has enjoyed a spectacular boom, radically shaking up conditions in all markets and countries where Carrefour’s banners operate. Consumption habits, consumer behaviour and the retail landscape have all changed. Each of these factors could have an impact on the Group’s operations and performance. The changing competitive environment is monitored and addressed at country level, and handled at Group level by Executive Management, in an effort to foresee and identify growth opportunities or decisions to be made. Natural disasters and climate change In most countries where it operates, the Group may be exposed to natural disasters, with direct or indirect impacts on its activities, assets, customers and employees, and entailing consequences for its financial position. In an environment impacted by climate change, uncertain meteorological conditions may also affect its operations, especially with regard to customer behaviour. Since 2008, the Group has conducted extensive work to improve the management of natural risks in its operations, and regularly updates its mapping of environmental risks and issues in order to develop knowledge, improve assessment, adapt preventive measures and adjust insurance coverage. This work was carried out in all countries where the Group operates, either directly or through franchises. A forward-looking exercise was conducted on climate change by using a mapping of natural risks and risk- and country-based assessments to identify “sensitive” sites and prevention fact sheets. Terrorism and crime The retail industry is particularly exposed to criminal and terrorist risks given the numerous parties with which it has dealings, its vast number of sites, and the flows of people, products and finances that its activity generates. This entails both material direct and indirect impacts, especially in stores. Preventive and protective measures for each site are determined based on risk exposure, with a regular review of the systems and adjustments made based on the development of threats. The Group is currently mapping its exposure to criminal and terrorist risks in all of its processes, from country level right down to store level. Events since 2015 have led the Group to revalidate and, where applicable, readjust the prevention and crisis management systems in several countries where it operates. Strategy and governance 4.7.1.2 Strategy definition, adjustment and implementation In a political, economic, social and competitive environment which is both uncertain and complex, any inefficiencies in developing, communicating and rolling out the Group’s vision and strategy may damage its reputation and financial and operational performance. Likewise any issues in managing projects or restructurings could also negatively impact the Group. Following its announcement of the “Carrefour 2022” plan, the Group is exposed to the strategic risks inherent in implementing any transformation plan. The plan sets out a number of objectives, including financial targets, which are based on various assumptions about the Group’s business and economic conditions. The Group may not be able to fully achieve its transformation objectives and, even if they are achieved, they may not produce the expected benefits or may not produce them as soon as expected. The Group’s inability to successfully implement and achieve its transformation objectives could have an adverse impact on its reputation and on its financial and operating performance. As part of business tracking and key action plans, each country carries out extensive work in building strategy in cooperation with Executive Management. Objectives and commitments are regularly reviewed to ensure that resources are allocated in the best possible manner. Compliance and fair practices In an increasingly litigious world, where regulatory authorities have broader power, the failure to comply with regulations and contractual commitments, within the scope of the Group’s operational activities and in its relations with its employees, can have a material impact on the Group’s financial performance and reputation. In October 2016, the Group distributed its Ethics Principles, providing employees with a set of guidelines on how to conduct themselves in the workplace on a daily basis. The Ethics Principles are shared with suppliers and service providers under Ethics Charters as described in the Group’s regulatory framework. Procedures are currently being implemented to assess the position of customers, key suppliers and intermediaries based on the risk map. A whistleblowing system introduced in 2016 can be used to report any breaches of the Ethics Principles, particularly with regard to corruption and conflicts of interest. Information, and in particular the whistleblower’s identity, is guaranteed to be kept confidential throughout the entire process. No disciplinary action may be taken against an employee who reports an ethics issue in good faith. The Group has taken the measures required to comply with the law of December 9, 2016 on transparency, anti-corruption and economic reform (known as the “Sapin II” law), which came into effect on June 1, 2017, and with the order of December 1, 2016 strengthening the French law on antimoney laundering and counter-terrorism financing, which implements in French law the European Directive of May 20, 2015 as described in Section 4.7.2 of the present Registration Document on the risk prevention and management system.