The main risks to which the Autogrill Group is exposed

The objective of the Group's Risk Management function is to ensure that the different business units making up the Group manage risks in a standardized way through the implementation of a model based on the systematic identification, analysis and assessment of the risk areas that can have an impact on the attainment of the Group's strategic objectives. It contributes to the development of the necessary risk mitigation actions aiming at reducing the level of volatility of the Group's preestablished objectives.

Below are the Group’s main risks: 

Traffic flow

The Group activities depend on traffic flow. Any factor that may significantly reduce traffic flow in the countries and channels in which the Group operates represents a risk for the generation of value.

A strategic factor to mitigate traffic flow risk is to work on the diversification of the Group's activities in terms of channels and geographic areas of operation; the ongoing updating of the offering and of the customer service level; the updating of the operating model; the focus on sales profitability through the implementation of a cost reduction policy while maintaining the same level of offering and service quality and the modulation of development investments to limit the impact on cash flow generation.

Reputation

Reputation both in relation to customers, landlords and licensors is particularly important for the Group and represents one of the main assessment factors in the process of assignment and renewal of the concessions by landlords.

To mitigate this risk, the Group carries out ongoing activities to monitor the service quality provided to customers and landlords.

Consumption habits

Changes in consumption habits represent a risk if the Group does not promptly and adequately react to changing customer requests with actions targeting the service model and the offering.

The availability of a broad portfolio of brands and commercial formulas contributes to mitigating this risk.

Cost of concession contracts

Group operations are mainly ensured through multiyear contracts for the assignment of commercial services awarded through competitive tenders by the holders of concessions for the management of the infrastructures (airports, highways, railway stations, etc.). As the competitive scenario and the characteristics of the tenders themselves have changed over time, when new concessions are awarded or existing ones renewed, the contractual conditions imposed by landlords may be less favorable than those currently in force. In addition, the concession contracts stipulated by the Group generally envisage, besides a multi-year duration, the obligation for the company to pay a guarantee minimum annual amount, regardless of the revenues generated by the services contracted.

In general, the Group mitigates this risk by strictly monitoring contract portfolio profitability, on the one hand, and on the other by implementing an approach that aims at establishing and maintaining a steady collaboration and partnership with landlords over time. This also includes the analysis of solutions, in terms of concepts and commercial offering, that maximize contract profitability.

Cost of personnel

Labor represents a key factor for the Group activities, characterized by a high level of service to consumers. The need to maintain levels of service consistent with customer and landlord expectations and the complexity of the overall international regulatory framework limit flexibility in managing the work force.

To mitigate this risk the Group has implemented actions that are based on the ongoing monitoring of the management processes and procedures aimed at maximizing labor efficiency, increasing flexibility and reducing the risk of accidents.

Regulatory framework

The Group’s operating sectors are subject to strict legislation for the management of operations and customer and employee safety, both with reference to the protection of the individual and product quality. Any failed compliance with regulations may result in loss of reputation towards landlords and customers in addition to exposing the Group to the risk of litigation.

To mitigate this risk, the internal functions, supported by experts in specialist areas, regularly monitor any changes in the regulatory framework to enable the Group to progressively adjust its processes and procedures, controls and new needs, and promptly develop staff training to make such adjustments operational. Also very important are the ongoing monitoring and auditing activities focusing on service quality compared to the contractual and regulatory requirements.

Innovation

The Group's ability to maintain a steady and ongoing process of innovation in its operating model, concepts, products and processes represents a key factor in keeping the level of service and the quality of the offering in line with customer expectations. Customer expectations are, in fact, of strategic importance to the Group.

The actions implemented to mitigate the reputation risk, the regulatory framework risk (relative to the quality of the processes for the preparation of the products and the provision of catering services) and the controls on the quality of the supplies of raw materials are the same applied to mitigate the risk pertaining to innovation.

Development of emerging markets

The Autogrill Group operates in a number of emerging markets and future projections include expansion into other emerging markets, which, typically, present higher risks than the areas in which the Group has its main operations.

To mitigate this risk, the Group, besides the diversification applied in terms of brands and commercial formulas, steadily monitors customer satisfaction, concentrating on the offering of an attractive portfolio of brands, concepts and commercial mix, in order to be in a position to promptly interpret and react to changes.