2010 REGISTRATION DOCUMENT (3.4 Mo) - Groupe Casino

31 DECEMBER 2010Risk Factors and Insurance22.7.2. OPERATIONAL RISKSRisks related to non-renewal of leasesand real estate assetsCasino has standard commercial leases on its supermarket andconvenience store premises but cannot guarantee that they will berenewed on expiry.The owners could have other plans for the premises on expiry of thelease, which could prompt them not to renew the Company’s leasedespite the high amount of compensation for eviction they would haveto pay. However, commercial leases are governed by strict legislationas regards term, termination, renewal and rent indexation, which limitswhat owners can impose.Given the very few disputes caused by non-renewal of commercialleases, the risk is not considered to be in any way material.As regards property development, where the Group is the projectowner, specifications are drawn up by experts in accordance withthe prevailing regulations and functional and operational objectivesare set for each project.More generally, the Group’s real estate portfolio is monitored regularlyto ensure its proper use.Risks associated with sales methodsThe Group’s banners in France have affiliate and franchise networks.These represented almost 55% of sales outlets at 31 December 2010,corresponding mainly to supermarket networks (including LeaderPrice) and convenience store networks. The credit risk on theseconvenience store affiliates and franchises is taken into account inthe Group’s credit management policy.Risks related to trademarks and bannersThe Group owns substantially all of its trademarks and is not dependenton any specific patents or licences, except for the Spar trademarkwhich is licensed to the Group for the French market. The licencewas renewed for ten years in 2009.Furthermore, although the Group has a preventive policy of protectingall its trademarks, it does not believe that an infringement would havea material impact on its operations or results.Supplier and merchandise management riskThe Group is not dependent on any specific supply, manufacturing orsales contracts. Casino deals with almost 35,540 suppliers.The Group has its own logistics network in France (approximately970,000 sq.m. spread among 20 sites) managed by its Easydissubsidiary. The network spans the entire country and delivers regularlyto the Group’s various banners, with the exception of Monoprix andFranprix-Leader Price which has its own logistics network.Risks related to private label goodsAs the leading private label retailer in the market, the Group sellsproducts under its own brand and can therefore be considered as aproducer/manufacturer. It draws up stringent specifications in termsof nutritional quality and quality standards for its product ingredients.However, it is nonetheless exposed to a product liability risk.Information systems riskThe Group is increasingly dependent on shared information systemsfor the production of costed data used as the basis for operatingdecisions. Security features are built into systems at the designphase and procedures are in place to constantly monitor systemssecurity risks.However, an information systems failure would not have any materialor prolonged impact on the Company’s operations or results.Geographical riskPart of the Group’s business is exposed to risks and uncertaintiesarising from trading in countries that notably could experience orhave recently experienced periods of economic or political instability(South America, Asia and the Indian Ocean region). Recent eventsin Venezuela and Thailand are described in notes 2.2 and 33 to theconsolidated financial statements. In 2010, international operationsaccounted for 38% of consolidated revenue and 41% of consolidatedtrading profit.Industrial and environmental risksThe Group adopted a formal environmental policy in 2003 called“Excellence verte”, which complies with the objectives set by thegovernment’s Grenelle de l’environnement programme. An EnvironmentOfficer is responsible for coordinating the activities of all of the Group’soperating units in the area of environmental protection.Environmental risks and management procedures are described inthe Environmental Report which follows this section.2.7.3. LEGAL RISKSCompliance riskThe Group is mainly subject to regulations governing the managementof facilities open to the public and listed facilities. Certain Groupbusinesses are governed by specific regulations, and more particularlyCasino Vacances (travel agency), Banque du Groupe Casino (bankingand consumer finance), Sudéco (real estate agency), Floréal andCasino Carburants (service stations), Mercialys (listed REIT) andL’Immobilière Groupe Casino, and GreenYellow (photovoltaic energyproduction). In addition, administrative consents are required to opennew stores and extend existing ones. International subsidiaries maybe subject to similar requirements under local legislation.Tax and customs riskThe Group is subject to periodic tax audits in France and the variousother countries where it has operations. Provision is made for allaccepted reassessments. Contested reassessments are provided foron a case-by-case basis, according to estimates taking into accountthe risk of an unfavourable outcome.Claims and litigationIn the normal course of its business, the Group is involved in variouslegal or administrative claims and litigation and is subject to audits byRegistration Document 2010 | Casino Group41