BIDDING RISK
Risks relating to the commercial and contractual model and the scope of services included in a client contract.
- Risk Timeframe: Long-term
- Category: Client & Consumer Centric
Impact
Some of Sodexo’s client contracts are long-term and may run between five and ten years. This is particularly relevant for the Business & Administrations segment.
Inaccurate pricing assumptions, a lack of definition or detail in the scope of services and inadequate contractual clauses during a bid proposal can lead to low margins or even losses on the contract, either in the startup phase or at a later date. In particular, new types of services arising as a result of the Covid-19 pandemic such as on-site health checks and wellness services need to be appropriately charged and contractually documented, and meet all local medical and data protection regulations.
Examples of Mitigating Activities
- Benchmark exercises, site visits, full due diligence and the use of technical expertise are all part of the process to establish unit costs, seasonality of services and base-line estimates (monitoring of cost and performance indicators to verify the relevance and competitiveness of our offer).
- Identification of the main contractual risks (from the analysis) and the deployment of measures to compensate these risks.
- System of review of projects by different stakeholders according to their size, stake and scope.
- Strict execution of Sodexo’s key processes for contract design & solution and mobilization.
- Creation of a Medical Advisory Council, a team of external experts to advise on the development of new protocols and standards.
- Early involvement of data privacy specialists in any new project or service.
COMPETITION
Sodexo faces both established competitors and new digital entrants at the local, national and international levels: risk of market share loss and loss of growth momentum.
- Risk Timeframe: Long-term
- Category: Client & Consumer Centric
Impact
Losing ground to competitors reflects a lack of understanding of the evolution of client needs and entails a lack of growth in revenues and lower profitability.
Examples of Mitigating Activities
- Combined On-site Services and Benefits & Rewards services programs such as Rise with Sodexo, widens the choice that can be offered to consumers in both activities.
- Creation of new offers to better respond to consumer expectations.
- Investment in digital technology including digital applications, innovative food solutions such as restaurant delivery and digital retail services, robotics to enhance cleaning and the use of artificial intelligence to improve services help Sodexo enhance the consumer experience and take advantage of the opportunities created.
- Strategic acquisitions to expand Sodexo’s offers.
- STEP: Sodexo’s performance management framework designed to drive operational performance through common operational indicators.
- Identification of savings to be redeployed in investment for growth.
- Strengthening of commercial teams on the ground.
