Adecco Group –
Notes to consolidated financial statements
in millions, except share and per share information

Note 18 • Risk management

The Company’s Board of Directors, who is ultimately responsible for the risk management of the Company, has delegated its execution to Group Management.

The risk management process is embedded into the Company’s strategic and organisational context. The process is focused on managing risks as well as identifying opportunities. The Company’s risk management process covers the significant risks for the Company including financial, operational, and strategic risks. All countries perform the risk management process on a regular basis and report their results to Group Management. The Company’s risk management activities consist of risk identification, risk assessment, risk response, and risk monitoring.

The Company’s Global Risk Categorisation Model has been used to support the countries when identifying risks. This model divides the risks into externally and internally driven risks. Within this model, Group Management has identified key risk categories, which can have a significant impact on the Company’s results. Those key recurring risk categories are, amongst others, economic trends/situation, client attraction/retention, associate attraction/retention, employee attraction/retention, financial reporting, IT environment, change in regulatory/legal and political environment, integration risk, and fraudulent activities. All identified risk categories have to be assessed by all countries within the Company.

The risk assessment includes the following steps: estimation of the potential risk impact on the financial results, assessment of the likelihood of the risk occurrence, assessment of the effectiveness of existing internal controls, and development of action plans needed to mitigate the risk to an acceptable level.

The risk assessment is aligned with the Company’s decentralised organisational structure. The countries report to Group Management a comprehensive risk assessment, including mitigating actions. At the Group Management level, the individual country results are reviewed and discussed with the countries before being categorised and consolidated. Risk monitoring is performed at Group level on a regular basis.

The financial reporting risk includes the failure to comply with external reporting requirements due to failure of internal controls and lack of knowledge of financial reporting requirements relating to accounting and reporting. The Company has implemented a Group Policy environment as well as an Internal Control System in order to mitigate the risk of failure to comply with financial reporting requirements. The Company’s Internal Control System is designed to provide reasonable assurance to the Company’s Management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of its published consolidated financial statements.

The financial market risk primarily relates to foreign exchange, interest rates, and equity market risk and is further discussed in Note 11. Except for the equity market risk, these exposures are actively managed by the Company in accordance with written policies approved by the Board of Directors. The Company’s objective is to minimise, where deemed appropriate, fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates and interest rates. It is the Company’s policy to use a variety of derivative financial instruments to hedge these exposures in the absence of natural hedges.

The Company concluded that the risk management process has worked properly throughout 2010.