High Medium✔ Low
The Group’s strategy of development through acquisitions and minority investments may create risks..
Part of the Group’s strategy hinges on enriching its range of advertising and communication services and increasing its operations in high-growth markets. As such, the identification of acquisition targets may be difficult, and the assessment of risks related to any acquisition or investment make prove to be incorrect. Sellers may also at times fail to divulge certain risks. The changing and unpredictable regulatory frameworks of certain emerging markets and certain local practices in these regions are another source of acquisitions risk. In addition, acquisitions may be concluded on terms that are less favorable than anticipated, and/or the newly acquired companies may either fail to be successfully integrated into Publicis’ existing operations or fail to generate the synergies or other benefits that were expected. Such events could have adverse effects on the Group.
A description of the Group’s main acquisitions during 2019 appears in Section 1.4.1 “Main investments and divestments during the past three years”. See also Note 2 (Section 6.6) to the consolidated financial statements “Changes to consolidation scope ”.
Goodwill from acquisitions and intangible assets (trademarks, client relationships), recorded on the Group’s statement of financial position for acquired companies may be subject to impairment.
Large sums have been recognized on the Group’s balance sheet with euro 11,629 million in goodwill and euro 1,979 million in intangible assets at December 31, 2019. Given the nature of its business, the Group’s most important assets are intangible, and are accounted for as such. Each year, the Group carries out an evaluation of goodwill and intangible assets so as to determine whether these need to be impaired. The hypotheses made in order to estimate the earnings and the forecasted cash flow in the course of these reevaluations may not beconfirmed by subsequent real earnings. If the Group were to carry out any such depreciation, the loss could have an adverse effect on the Group’s earnings and financial position. Analysis of goodwill and intangible assets carried on the Group’s Statement of Financial Position is detailed in Notes 10 and 11 to the consolidated financial statements (Section 6.6).
High Medium✔ Low
The digital marketplace is expanding at unprecedented pace, and the reliance on information technology has never been greater. This reliance brings risk to the Group in the form of systems failures and malicious attacks, as well as potential insider threats.
Systems failures can result both from natural or malicious events or the mere failure of components, a partner or a supplier. This could potentially result in long periods of malfunction and hinder our ability to serve our clients. Malicious attacks come in the form of denial-of-service attacks, cyber-attacks, computer hacking, computer viruses, worms or other malicious software. Each of these has the ability to inhibit normal business operations and even suspend them for periods of time, as well as potentially infecting client deliverables and even their own network environments, thereby causing significant damage.
Finally, insider threats, although normally not malicious, can also be seriously detrimental to normal business operations. Untrained or ignorant staff can unwittingly share sensitive or personal information, or innocently fall prey to the numerous cyber-attacks (phishing, spear phishing, CEO fraud, etc.). The malicious or disgruntled insider, while rare, can also inflict serious reputational or financial damage by purposefully releasing confidential and sensitive information.
Such risks of IT failures and cybercrime could have significant adverse effects, including in terms of additional costs, potential loss of revenue and reputation for the Group, as well as exposing it to legal liability.
