Risk profile

The profile of Ordina’s material risks can be summarised in a number of market risks, financial risks and operational risks. These risks are directly associated with market developments, our market position and our operations. These risks and our approach to risk management are described in greater detail elsewhere in this report. Here we have limited ourselves to references to the pages where more detailed descriptions are given of those risks within the context of our business.

Market risks

• The market continues to be characterised by increasingly large and complex contracts. As a result, winning or losing such contracts may have a material impact on our performance. We refer to page 27.
• The offshore trend is continuing, driven by both shortages on the labour market and cost control. This trend poses a challenge as well as an opportunity. We refer to pages 27 and 36.

Financial risks

• Much of Ordina’s portfolio of activities, particularly in the areas of Consulting and IT, are and remain sensitive to upturns and downturns in the economy, with most of the costs of a service provider being fixed. This is not expected to change in the near future. It is of the essence that we continue to focus on increasing our revenue from long-term contracts, cutting costs and increasing the flexibility of our cost-base so that we are able to post a sound performance regardless of cyclical movements. We refer to pages 29 and 37.
• Our investments in the BPO initiative are considerable. As far as our BPO services are concerned, investments will run ahead of the benefits. Over the next few years, revenue from BPO services will need to continue to increase strongly in order to make this division profitable on a structural basis. We refer to pages 30, 37 and 39.
• Ordina has deliberately opted to pursue a strategy that reinforces our market position through acquisitions. With profitable acquisitions, part of the purchase price is made up of goodwill. If the economy were to falter at any point in the future, we might have to post an impairment loss on some of the goodwill. We refer to pages 32, 36 and 38.

Operational risks

• Control of increasingly larger projects, some of which are executed offshore while remaining Ordina’s responsibility, combined with an overall growing responsibility for deliverables, continue to pose a risk that requires and receives our professional attention on a continuous basis. We refer to page 43.
• Where our BPO services are concerned, we plan to transfer existing clients to our newly built and standardised systems and processes in the course of 2008. Transformations of this kind present a risk and must be executed with the greatest possible care. We refer to pages 30, 37 and 43.
• Ordina acquires businesses with the ultimate goal of integrating them into the Ordina organisation in order to join forces. It is essential that the integration process is handled with due care in order to reduce the risk of unwanted staff turnover. We refer to page 32.
• Increasing shortages on the labour market may slow down future growth. We refer to pages 24 and 33.

Internal Control