Universal Registration Document - Fiscal 2023

6. Risk management

Description of Principal Risk Factors

The tables below describe Sodexo’s principal risk factors, their possible impact and give examples of measures implemented to reduce these risks.

CLIENT RETENTION
Risk of not keeping and renewing contracts with Sodexo’s existing clients.
Catégory : Clients/Consumers
Impact Examples of Mitigating Activities

With consumers working both at home and in the office on a regular basis, Sodexo's food offer has to be flexible enough to be able to reach them  in both places. Sodexo needs to be able to offer both traditional on-site dining, and also anywhere dining for companies that have hybrid working policies, or for example, companies that have no restaurants facilities on-site. Sodexo must work with its clients pro-actively as a partner to adapt to their circumstances and continue to meet evolving client needs. A lack of ability to adapt to the client’s circumstances, an inability to transform its services to remain attractive to meet client/consumer demand, or any changes in client outsourcing strategy could mean that the client is not retained, possibly leading to:

  • less growth;
  • decrease in profitability;
  • reduction in employee satisfaction;
  • loss of credibility in the market place.
  • On-site teams continually listening to the client and the consumer; aggregated insights are then fed into operational, functional and strategic teams.
  • Strengthening of the client relationship management process to ensure alignment with client and Sodexo's expectations on an on-going basis.
  • Broadening of the multi-channel food offer through targeted acquisitions.
  • Risk reviews carried out with key accounts every six months to review retention risks.
  • Utilization of common, global tools and reporting to ensure transparency and commitments to forecasting and reporting of both achievement and risk.
CHANGING CONSUMER EXPECTATIONS AND BEHAVIORS
Increased consumer expectations around personalized, innovative and digital services, and healthy food choices. Increased consumer expectations in relation to business conduct and environmental impact. Structural changes in the way consumers choose to consume food.
Catégory : Clients/Consumers
Impact Examples of Mitigating Activities
Consumers expect a personalized meal experience. They want to be able to consume food in different ways and at a time of their choosing. They expect more choice, more convenience, healthier options, all combined with the benefits of technology to make a smoother and more seamless dining experience. Over and above that, consumers also want to spend their money with companies that engage in socially responsible behavior. If Sodexo cannot adapt its consumer offer adequately or cannot anticipate and meet consumer expectations for innovation, personalization and in relation to environmental impact or business conduct, its revenues, as well as its reputation, could be affected.
  • Acceleration of the multi-channel delivery model which offers consumers greater flexibility for food consumption: click and collect, delivery, micro-markets, connected fridges.
  • Increased use of technology, for example robotic food delivery on-campus, 24/7 automated kiosks, digital ordering apps for collection or delivery.
  • Focus on expanding the provision of plant-based meals, offering consumers both a healthy option and one with a lower carbon footprint.
  • Supplier Inclusion program that proactively focuses on buying from small and medium-sized companies, suppliers owned or operated by women or people from minority groups and major suppliers who actively embrace diversity, equity and inclusion in their workforce. 
BIDDING RISKS
Risks relating to the commercial and contractual model and the scope of services included in a client contract.
Catégory : Clients/Consumers
Impact Examples of Mitigating Activities
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. Factors such as:
  • inaccurate pricing assumptions;
  • a lack of definition or detail in the scope of services;
  • underestimating the complexity of the scope of work; 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.
  • Benchmark exercises, site visits, full due diligence and the use of technical expertise are all part of the process to establish 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.
  • Use of costing models and benchmarking to validate assumptions.
  • Robust, standardized and transparent costings.
  • Integration of different stakeholders in the review process to better anticipate possible issues.
  • Strict execution of Sodexo’s key processes for solution and contract design & solution mobilization.