Ubisoft 2013 Annual Report Download - page 52

Management Report
2013
47
Keen to always be in sync with technological developments and meet the needs of its employees and
consumers, Ubisoft assesses, approves and supports the implementation of innovative solutions while
also complying with internal security standards. As such, Ubisoft continues to increase employee
mobility through solutions which allow them to work with their personal tools while still guaranteeing
the integrity and confidentiality of Ubisoft data.
Ubisoft continues to adapt and improve its approach to risk management in order to meet future
challenges in an environment where technologies are constantly evolving.
MARKET RISKS 1.7.4
FINANCIAL RISKS 1.7.4.1
In the course of its business, the Group is exposed to varying degrees of financial risk (foreign-
exchange, financing, liquidity, interest-rate), counterparty risk and equity risk.
Group policy consists of:
x Minimizing the impact of its exposure to market risks on both its income and, to a lesser
extent, its balance sheet;
x Tracking and managing this exposure centrally whenever regulatory and monetary
circumstances allow;
x Using derivatives for hedging purposes only.
The risk management policy and its organization within the Group - notably through the Treasury
Department, attached to the Finance Department - are described in the Chairman's internal audit
report.
Additional information and figures on exposure to these different risks are detailed in Note 16 to the
consolidated financial statements.
FOREIGN EXCHANGE RISK
In light of its international presence, the Group may be exposed to exchange-rate fluctuations in the
following three cases:
x Through its operating activities: Sales and operating expenses of Group subsidiaries are
largely denominated in local currency. However, some transactions such as license agreements and
intercompany invoicing are denominated in another currency. The operating margin of the subsidiaries
concerned may therefore be exposed to fluctuations in exchange rates involving their operational
currency;
x Through its financing activities: In line with its policy of centralizing risks, the Group has to
manage financing and cash in various currencies;
x During the process of translating the accounts of its subsidiaries from foreign currencies into
euros: Current operating income may be generated in currencies other than the euro. As a result,
fluctuations in foreign currency exchange rates against the euro may have an impact on the Group's
income statement. These fluctuations also affect the carrying amount of assets and liabilities
denominated in foreign currencies and appearing in the consolidated balance sheet.
The Group first uses natural hedges provided by transactions in the other direction (development costs
in foreign currency offset by royalties from subsidiaries in the same currency). The parent Company
uses foreign currency borrowings, forward sales or foreign-exchange options to hedge any residual
exposures and non-commercial transactions (such as inter-company loans in foreign currencies).
The sensitivity of Group earnings to changes in the value of its main currencies is described in Note 16
to the consolidated financial statements.