Fiscal 2022 Universal Registration Document

6 CORPORATE GOVERNANCE

Interconnectivity of Principal Risk Factors

Sodexo’s risk factors may arise individually, but they can also have an effect on each other. In order to better understand the relationship between the risk factors, and to enhance overall risk resilience, a mapping of the interconnectivity of the risk factors was carried out. This mapping is show below.

INTERCONNECTIVITY OF RISKS

 

This diagram shows the interconnectivity of principal risk factors

 

The compliance with laws and regulations are interconnected with:

  • Technology and information security
  • Client contract execution

Pandemic risks are interconnected with:

  • staff shortages and resource planning

Client retention is interconnected with:

  • Talent management and development
  • Client contract execution
  • Competition
  • Changing consumer expectations and behaviors

Changing consumer expectations and behaviors are interconnected with :

  • Environmental impact
  • Client retention
  • Competition
  • Technology and Information security

Bidding risks are interconnected with:

  •  Competition

Competition is interconnected with:

  • Bidding risks
  • Changing consumer expectations and behaviors
  • Client retention

Client contract execution is interconnected with :

  • Client retention
  • Compliance with laws and regulations
  • Food, services safety and workplace safety
  • Staff shortages and resource planning
  • Talent management and development

Technology and Information security is interconnected with:

  • Changing consumer expectations and behaviors
  • Compliance with laws and regulation

Talent management and development is interconnected with:

  • Client retention
  • Client contract execution
  • Staff shortages and resource planning
  • Food, services and workplace safety
  • Compliance with laws and regulation

Staff shortages and resource planning is interconnected with :

  • Client contract execution
  • Pandemic risks

Food, services and workplace safety is interconnected with :

  • Talent management and development
  • Client contract execution

Environmental impact is interconnected with :

  • Changing consumer expectations and behaviors
6.4.3.2 Emerging Risks

In carrying out its risk assessment, Sodexo also considers risks arising from changes in the external environment. This includes a consideration of emerging risks that are new external risks or existing external risks that have evolved with time, or have been triggered by changed circumstances. They may be perceived to be potentially significant, but might not yet be fully understood, and/or the consequences may be difficult to quantify.

Climate Change Risk

In Fiscal 2021, we identified climate change as an important emerging risk that will impact Sodexo’s business. To underline the importance of this risk, a cross-functional Sodexo team worked with external specialists in Fiscal 2022 to better identify and analyze the risks and opportunities created by climate change.

This risk assessment was carried out using the Task Force on Climate-Related Financial Disclosures (TCFD) framework. This framework divides risks into:

  • physical risks: acute event-driven risks resulting from client change such as an increase in severity in floods, cyclones or hurricanes, and chronic risks that result from shifts in longer term weather patterns such as higher temperatures causing more heatwaves;
  • transition risks: the policy, legal, technology and market change risks that may arise for a company transitioning to a lower carbon economy. Further reputational risk may also occur if a company fails to transition fast enough or meet stakeholder expectations in relation to climate change.