Geographical risk

Definition
Geographical risk consists of country risk, relating mainly to GDP volatility, economic and governmental instability and debt collection problems.

Renault has a commercial and/or manufacturing presence in many countries outside Western Europe, including South Korea, Romania, Brazil, Turkey, Argentina, Colombia, Chile, Russia and Morocco. It has set up prevention systems to address the risks arising from the Group's increasingly broad international presence.

Since 2004, the Group's analysis of geographical risk and its response to this risk have been enhanced by new tools and indicators. These tools and indicators take into account:

• Country risk premiums: a higher rate of return is required for any new project involving investment in an emerging-market country;
• Short-term liquidity risk: a trend indicator allows risk to be monitored for each individual country;
• Intra-Group financial flows: a finance and invoicing system is used to centralize management of financial risks.    

Product risk

Definition
Product risk relates to the quality of end-products, since defects or malfunctions may make them impossible or dangerous to use.

The organization put in place by Renault is intended to limit the number of incident-exposed vehicles. The gravity and safety impact of incidents are assessed and the risk is dealt with as quickly as possible, notably in the event of a recall campaign.
In addition to existing measures, Renault has taken the following actions to reduce product risk:

• Defining “Undesirable Customer Events”, which would endanger users' safety; 
• Application by the engineering departments of this list of Undesirable Customer Events to the physical objects and logical systems that could cause such events in the event of failure;
• Establishing a set of best practices; 
• Training staff in general product safety;
• Continuous improvement  of risk control practices and standards throughout the entire product life cycle.
  

Supplier risk

Definition
Supplier risk relates to the quality of products purchased from suppliers, as well as their employee-relations, environmental and financial performance.

Renault is very careful when selecting suppliers, and manages supplier risk in terms of quality, costs and delivery times (QCD). 

Prevention measures 

Renault uses prevention measures to ensure: 

• The financial health of suppliers;
• Delivery quality.   

Suppliers and sustainable development

In 2004, the Purchasing Department initiated a sustainable development action plan. This included: 

• Incorporating sustainable development criteria into purchasing processes;
• Providing training on changes to processes based on sustainable development criteria;
• Investigating the position of suppliers with respect to Renault's sustainable development's requirements.
  

Industrial risk

Definition
Industrial risk concerns Renault's production sites. It relates mainly to issues concerning health, safety and pollution.

The Group has an active prevention policy covering all its production plants. Prevention efforts apply to both people and property.

Central experts establish standards for worldwide application and keep risk analyses up to date. They are supported by local teams in each plant that have received training in industrial risks.

Each year, four insurance companies verify the application of prevention and protection rules. 

Environmental risk

Definition
Environmental risk relates to the impact of the company's activities on the environment, on staff and on the local population.

Renault is committed to making its automobiles environmentally friendly, and places great importance on managing environmental risk.
In all its sites, the Group defines methods and allocates resources in order to identify risks, quantify impacts and organize prevention.

These arrangements cover:

• Environmental risks and any damage resulting to humans;
• The rehabilitation of areas of soil pollution arising from past activities;
• Environmental audits for purchase and sale agreements.   

Renault's policy enables it to:

• Develop a good understanding of each site's environmental issues;
• Identify sources of pollution by type of pollutant and by business activity.    

IT risk

Definition
IT risk is the risk to the orderly operation of its IT network and relates to the continuity of IT services, IT security and data protection.

Within the Information Technologies and Systems Department, the Quality and Security Department (DQS) leads the program to reduce IT risks at the Group level.

The prevention program includes: 

• IT security standards and procedures;
• Collaboration on IT projects and developments;
• A multi-year site supervision plan;
• IT audits.    

As part of the growing collaboration with Nissan, the Group's IT security policy is changing to include global best practices (ISO 17799 BS7799).

Distribution risk

Definition
Distribution risk concerns the product distribution system, its financial health and its internal control procedures.

Renault's distribution risk management efforts take into account the three levels at which the Group is exposed to risk: 

• Import subsidiaries;
• Distribution subsidiaries (RRG);
• Dealership network.   

Renault bolstered its risk prevention efforts in 2004 by mapping risks in the automobile distribution industry, and by implementing multi-year action plans. 

Operational risk coverage

Insurance programs ensure identical coverage in all countries, with the exception of subsidiaries in Chile and Colombia.

These programs cover:  

• Damage to property and the resulting loss of business;
• Insurable civil liability;
• Damage to vehicles during transportation.   

Other risks

Other risks relate to:

• Off-balance sheet commitments, i.e. guarantees and endorsements granted by the Group in the normal course of business;
• Pension commitments, consisting primarily of retirement compensation;
• Tax and customs risks, relating to demands for tax arrears.