Annual Report 2010

Risk management

The risk management process at the Adecco Group has strategic and organisational dimensions. The Adecco Group actively manages its risks and identifies business opportunities.

The process

The risk management process at the Adecco Group has strategic and organisational dimensions. Besides monitoring, analysing and mitigating risks, the aim is also to identify opportunities. From a management perspective, risks identified at country and corporate level are treated as opportunities for improvement. All countries perform the risk management process on a regular basis and report their results to Group Management. In that sense, the risk management process is a vital part of daily activities within the organisation. The Group’s financial risk management activities are also covered in the Financial Review. This section focuses on describing where key risks emerge and the actions Adecco takes to manage and mitigate those risks.

Key business risks

Economic environment

Demand for HR services is sensitive to changes in the level of economic activity. When the global economy accelerates, growth rates for staffing and other HR services increase; when the economy slows down, so does demand for staffing and HR services. Resulting fluctuations in revenue and profitability need to be managed accordingly through tight cost control in order to ensure financially sound results.

How do we handle changes in economic activity? Given the low visibility of the staffing business, it is important that management at country level is on top of economic developments in order to adapt the cost base to revenue trends. Corporate and regional management need to maintain an active dialogue so that capacity can be adjusted as and when necessary. Close monitoring of monthly results and updated forecasts ensure a rapid response to business developments. Our focus on EVA supports this approach.

Client attraction and retention

The Adecco Group’s business potential and long-term prospects depend on attracting and retaining clients. Client satisfaction, as a result of our services rendered, is a key indicator for client retention and therefore needs to be monitored closely.

How do we ensure client attraction and retention? The active use of the client Global Satisfaction Survey, which is carried out twice a year, is a valuable tool to monitor client satisfaction within countries and regions. The Adecco Group uses the results to train and support salespeople, to draft and execute sales action plans, and to further enhance services to meet client needs. In parallel, we continue to improve our delivery channels and optimise sales processes, leading to enhanced client attraction, greater client satisfaction and ultimately to increased revenue growth prospects.

Associate attraction and retention

We depend on our ability to attract and retain associates who possess the skills and experience to meet clients’ staffing needs. With talent shortages in certain sectors and intense competition for skilled individuals, providing suitably qualified associates is a challenge. A part of our continued success depends on our ability to offer associates attractive assignments and conditions in order to attract and retain them.

How do we address associate attraction and retention? Key to retaining associates is being able to offer consecutive assignments and competitive wages. Our Global Satisfaction Survey also addresses associates and is designed to help us identify their needs. The findings are continually evaluated and implemented in our solutions of servicing qualified people to keep up with changing client needs and emerging technologies.

Employee attraction and retention

The effectiveness of our operations depends on the commitment of key corporate personnel, local managers and field staff. Local relationships and the quality of services are vital to our ability to attract and retain business. The loss of top personnel, with valuable operational experience in the global HR services industry or with strong customer relationships, may cause significant disruption to our business.

How do we respond? Retaining and hiring the right people and placing them in the right job can significantly influence Adecco’s business prospects. The annual Great Place to Work® survey gauges employees’ satisfaction with their workplace. Compensation packages need to be competitive and closely aligned with Company targets. EVA as a performance based incentive concept is applied at almost all levels and regions of the organisation. Adecco endorses the view that frequent, honest and transparent communication, as well as a clear strategy from top management, is essential in ensuring employee satisfaction.

Information technology

IT plays a pivotal role in today’s business operations. The growing dependency on IT makes the potential impact of disruptions even greater. Key IT-related risks include failure of the IT infrastructure, leading to loss of service or a leakage of confidential business information, among others.

What mitigating measures do we take? We continue to improve our existing IT process risk management, including monitoring, security and compliance, coupled with continual assessment of our global security and IT infrastructure (network, database, application). Furthermore, we have a contingency plan based on a detailed, country-by-country assessment of our exposure to a severe IT disruption.

A review of agreements with IT service providers and enhancement of service-level and contract management processes are embedded in the IT processes, as is the steady improvement of user security awareness.

Integration risk

The successful integration of acquired businesses is essential in order to ensure that future return requirements are met. With the acquisition of Spring Group in the UK in 2009 and US-based MPS Group in 2010, the local management in North America and the UK & Ireland, together with the respective integration leaders, ensure a smooth transition of employees, clients, associates, IT and property into the Adecco Group.

How do we manage the integration process? To mitigate integration risks, a steering committee has been put into place. Regular updates from integration leaders in close cooperation with the local management, monitored and challenged by the steering committee members, guarantee a proper execution of the integration processes. Acquisitions in the staffing industry are about people. Retaining key employees is consequently a top priority of management in the integration process.