RISK FACTORS AND INTERNAL CONTROL Investors are urged to carefully review the risks described in this chapter, as well as all of the other information set forth in this Registration document. Such risks are, on the date hereof, the risks that Rexel believes may have a material adverse effect on its financial condition or its results of operations, should they occur. Rexel conducted a review of these risk factors and considers that there are no other significant risks than the ones described in this section. Note that there may, however, be other risks that have not yet been identified as of the date of this Registration document, or whose occurrence as of the date hereof is not considered likely to have a material adverse effect. 2.1 RISK FACTORS In a constantly changing environment, Rexel is committed to protecting the interests of its shareholders, employees, clients, suppliers, and all other stakeholders, while achieving its objectives. In this context, Rexel is implementing an active risk management policy in order to be able to efficiently respond to internal and external threats likely to have a material adverse effect on its financial condition, its results of operations or its reputation. The risk management approach initiated by Rexel, in particular through the Risk Committee, allows the identification of significant risks and the implementation of risk management measures for each of them. This chapter describes the risk factors of the Rexel Group, as well as the major procedures implemented to limit those risks’ likelihood and/or impact. The risk management process implemented within the Rexel Group is described in section 2.3 “Internal control and risk management procedures” of this Registration document. The surveillance program (plan de vigilance)established within the Rexel Group is described in paragraph 4.2 “Vigilance plan” of this Registration document. 2.1.1 Risks relating to the industry Group estimates that the industrial, commercial and residential markets, respectively, represented 2.1.1.1 Risks relating to the general economic 33%, 45% and 22% of its 2017 sales from the environment distribution of electrical equipment. However, this Risk distribution varies by region and by country (see The Rexel Group’s end-markets are the industrial paragraph 1.4.1 “The Rexel Group’s markets” of this and construction (for commercial and residential Registration document). For example, the industrial bui ldings) markets. These markets can be market accounts for approximately 36% of the Rexel further subdivided into investment (projects) Group’s 2017 sales in North America while it is close and maintenance, on the one hand, and new to 91% of the Rexel Group’s 2017 sales in China, and construction and renovation, on the other hand. approximately 24% in France. In each geographical The Rexel Group’s business is sensitive to changes region, construction, renovation, and maintenance in general macroeconomic conditions and, more activities evolve differently. particularly, those affecting industrial investments An economic downturn in one or more of the Rexel and the construction, renovation and maintenance Group’s markets, or across al l of its markets, may of residential and commercial buildings. In addition, have an adverse effect on its financial condition, the demand for the products distributed by the Rexel results of operations or its ability to implement its Group, the prices of such products and the Rexel strategic decisions. Group’s margins depend on many factors, such as Similarly, political or economic instability in one of inflation, interest rates, bank credit availability, or the countries where the Rexel Group is established changes in economic and monetary policy. may have an adverse impact on the results of The impact of changes in macroeconomic operations in such country and of the Rexel Group. conditions varies depending on the end-markets and geographic regions in which the Rexel Group Management of risk operates. Europe, North America and Asia-Pacific Regarding risks related to the Brexit, it remains accounted for 55%, 35% and 10% of the Rexel difficult to foresee its real impact given the Group’s 2017 sales respectively. In addition, the Rexel uncertainty relating to the practical procedures REXEL 2017 – REGISTRATION DOCUMENT 36