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Directors’ Report
Great Britain, Fercable in Spain and Wuppertal in Germany).
Furthermore, there were other strikes in France (Calais and
Douvrin) and Brazil for reasons related to contract renewals.
Precisely because of these recent events, it is not possible to
exclude further disruption in the future and, if this occurs for
significantly longer periods and the cost exceeds the Group’s
current insurance coverage, its activities, results of operations
and statement of financial position could be adversely
affected.
In addition, activities relating to the submarine cables
business are closely dependent on certain specific assets,
such as the Arco Felice plant in the province of Naples and
the “Giulio Verne” cable-laying ship. The Prysmian Group
believes that a prolonged stoppage in the operation of these
assets could have an adverse impact on its activities, results of
operations and statement of financial position.
In order to avert such operating risks, the Risk Management
function systematically reviews risk at all Group companies
in order to identify and quantify operating risks and establish
and manage policies that address such risks. In particular, it
periodically reviews the level of insurance coverage, premiums
paid, losses incurred and the damages recovered by the Group.
A plan for preventing such risks is prepared for every Group
company, indicating the key areas of control.
As part of the “Loss Prevention” programme, applied at every
plant in the pre-acquisition Prysmian Group and currently
being implemented at the Draka plants (about 1/3 of which
were covered by the programme at the end of 2012), the
Risk Management function periodically inspects the Group’s
plants to identify and prevent potential risks. The following
classifications are used to establish the level of risk:
• plants with controlled risks (Excellent HPR - Highly
Protected Risk);
• low risk plants (Good HPR);
• medium-low risk plants (Good not HPR);
• medium risk plants (Fair);
• high risk plants (Poor).
The investment needed to reduce the level of risk at each plant
is estimated with the goal of achieving an “Excellent HPR”
classification for all the Group’s facilities.
As at 31 December 2012, all of the plants inspected were
classified as “Excellent HPR”, “Good HPR” or “Good not HPR”;
no plant was classified as medium or high risk.
Risks associated with the supply and availability of raw
materials
Copper is the principal raw material used by the Prysmian
Group for its manufacturing processes. The other raw
materials used are aluminium, lead and steel, as well as
various petroleum derivatives, such as PVC and polyethylene.
The Group has always been able to obtain sufficient supplies
of metals and other raw materials to meet its production
needs and does not consider itself dependent on any one
supplier. As far as possible, the Group seeks to diversify its
sources of supply. The Group procures most of its resins and
plastic materials from the major world suppliers, signing
supply contracts normally for a year with monthly deliveries,
and satisfies the remainder of its needs by producing such
materials directly at some of its plants. In addition to
the policies of diversifying the sources of supply for more
critical materials, the availability of such materials is also
based on building long-term partnership relationships and
arrangements with leading suppliers in the respective sectors.
With particular reference to optical fibre, the Group believes
it has sufficient production capacity to meet its needs for the
production of optical fibre cables and for sales of such material
to third parties. Nonetheless, for commercial and strategic
reasons, the Group has decided to adopt a policy of sourcing
part of its optical fibre from third-party manufacturers.
Risks associated with information systems
To support integration of the Draka business, the Prysmian
Group has initiated a major project to upgrade and consolidate
its various information systems into standard platforms using
a common model based on the latest technological processes.
The Prysmian Group is aware of the risks associated with such
projects, primarily in connection with possible inaccuracies
in data uploading. However, the Group believes that it has
taken every step necessary to limit such risks through testing,
training, and preparation, as well as through appropriate
contracts with the suppliers of the replacement technology.
A detailed analysis of activities in the information systems
area can be found in the “Information Systems” section of the
Directors’ Report.
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| 2012 annual report prysmian group
