2010 REGISTRATION DOCUMENT (3.4 Mo) - Groupe Casino

231 DECEMBER 2010Risk Factors and Insurance2.7. RISK FACTORS AND INSURANCERisk management is an integral part of the day-to-day operationaland strategic management of the business and is organised atseveral levels (for further details, see section on “Chairman’s reporton internal control and risk management” as of page 185 of thisRegistration Document).The Group has reviewed the main risks that could have a materialimpact on its operations, financial position or results. These risks aredescribed below.2.7.1. MARKET RISKSThe Group has set up an organisation to manage liquidity, currencyand interest rate risks on a centralised basis. The Corporate FinanceDepartment, which reports to the Group Chief Financial Officer, isresponsible for managing these risks and has the necessary expertiseand tools, particularly in terms of information systems, to fulfil this task.The Corporate Finance Department operates on the main financialmarkets according to guidelines that guarantee the highest levels ofefficiency and security. A regular reporting system has been set up,allowing Group management to sign off on the policies followed, whichare based on strategies approved in advance by management.Interest rate riskDetailed information about interest rate risk is provided in note 31.2.1to the consolidated financial statements. The Casino Group usesvarious financial instruments to manage interest rate risk, particularlyswaps and interest rate options. These instruments are used solelyfor hedging purposes. Details of hedging positions are provided innote 31.1 to the consolidated financial statements.Currency riskInformation about currency risk is provided in note 31.2.2 to theconsolidated financial statements. The Casino Group uses variousfinancial instruments to manage currency risks, particularly swaps andforward purchases and sales of foreign currencies. These instrumentsare used solely for hedging purposes.Liquidity riskThe breakdown of long-term debt and confirmed lines of credit bymaturity and currency is provided in note 31.4 to the consolidatedfinancial statements, together with additional information concerningdebt covenants which, if breached, would trigger early repaymentobligations.The Group’s liquidity position appears to be very satisfactory. Upcomingrepayments of short-term financial liabilities are comfortably coveredby cash, cash equivalents and undrawn confirmed bank lines.The Group’s cash and cash equivalents present no liquidity orvalue risk.Its loan and bond agreements include the customary covenants anddefault clauses, including pari passu, negative pledge and crossdefaultclauses.None of its financing contracts contain a rating trigger.Public bond issues on the euro market and short-term confirmed banklines (up to one year) do not contain any financial covenants.Confirmed medium-term bank lines and some private placements (USprivate placement notes, 2009 private placement notes and indexedbonds) contain financial covenants which, if breached, could triggeraccelerated repayment.In the event of a change of control of Casino, Guichard-Perrachon(within the meaning of article L. 233-3 of the French CommercialCode), most loan agreements include an option for the lenders, at thediscretion of each, to request immediate repayment of all sums dueand, where applicable, the cancellation of any credit commitmentsentered into with the Company.Commodity riskGiven the nature of its business, the Company is not exposed to anymaterial commodity risk.Equity riskPursuant to the share buyback programme authorised by theshareholders (see section on Share capital and share ownership),the Company is exposed to a risk related to the value of the treasuryshares it holds.Sensitivity to a 10% decrease in the Casino share price is shown innote 18 to the parent company financial statements.The Group’s portfolio of marketable securities (see note 23 to theconsolidated financial statements and note 8 to the parent companyfinancial statements) consists primarily of money market mutual funds.The Group’s exposure to risks on this portfolio is low.Credit and counterparty riskThe Group is exposed to customer credit risks through its consumerfinance subsidiary, Banque du Groupe Casino. These risks aremeasured by a specialist service provider using credit scoringtechniques. Further information on credit and counterparty risk isprovided in note 31.3 to the consolidated financial statements.Many of the Group’s supermarkets and convenience stores areoperated by affiliates or franchisees. The credit risk relating to theseaffiliates and franchisees is assessed by the Group on a case by casebasis and taken into account in its credit management policy, mainlyby taking collateral or guarantees.40 Casino Group | Registration Document 2010