CFE - 2006 annual report - Vinci

9 8 B. Risk factors
1. Risks common to the segments in which the CFE group is active
1.1 Operation risks
1.1.1 The act of construction
The main characteristic of the sector lies in the commitment made at the submission of a proposal, to build a structure
(building, engineered structure, dock...) that is by its nature unique, for a price whose terms are predetermined and within
an agreed timescale.
The risk factors therefore concern:
• establishment of the price of the structure to be built and, in case of divergence between the anticipated price and the
actual price, the possibility (or not) of obtaining coverage for additional costs and price increases;
• design, if this is the contractor’s responsibility;
• the actual construction and, in particular, the risks concerning the subsoil and the stability of the structure;
• control of the elements included in the cost price;
• project duration;
• performance obligations (quality, schedule) and the related direct and indirect consequences;
• warranty obligations (decennial, maintenance);
• compliance with safety and other corporate law obligations that are extended to service providers.
To manage these risks, CFE has qualified and experienced staff, the services of an internal design office and access to exter-
nal design and stability offices, as well as to inspection organizations.
Submitted quotes follow strict procedures for proposal review and are submitted, if appropriate, to a risk committee. Projects
are subjected to budgetary controls and a quarterly progress review.
1.1.2 Real estate
At a high level, real estate activity is directly or indirectly subject to certain factors of a macroeconomic (interest and savings
rates, etc) and policy (supra-national development institutions, development plans, etc.) nature that influence the behaviour
of the players in the market, on both the demand and supply sides.
This activity is also characterized by long transaction cycles, which implies the need to anticipate decisions and to underwrite
commitments over long terms.
In addition to general sector risks, each project has its own risks:
• selection of land investment;
• definition of the project and its feasibility;
• obtaining the various permits and authorisations;
• control of construction costs, fees and financing;
• marketing.