Annual report 2019

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the company is usually able to make a reasonably accurate estimate of this income. Should it transpire during a salvage operation that the fnal salvage fee may not be suffcient to cover the costs incurred, then the choice can be made to convert the LOF into a contract based on a daily hire fee, thus limiting the fnancial risks. Contracts for salvaging sunken vessels (wrecks) are usually carried out on a lump sum basis. The contracting and execution of such projects, which in many cases do involve a tendering procedure, are subject to the customary procedures for contracting and execution activities applicable within Boskalis. Some of the equipment within the Offshore Energy division, as well as in some of the strategic joint ventures, is chartered out for relatively short periods (spot markets), mainly subject to standard conditions. The challenging market conditions in the oil and gas sectors have reduced the volume of work under long-term contracts and resulted in an increased share of the spot market activities. Although the operational risks involved in such activities are generally relatively limited, they do result in increased utilization and pricing risk, which we aim to mitigate through adequate capacity and strict cost control management. ENVIRONMENTAL AND SOCIAL RISKS To gain insight into the relevance and importance of environmental and social topics, Boskalis engages with its stakeholders and regularly conducts a materiality analysis. The outcome of this engagement is reflected in our sustainability report in a materiality matrix. The nature of most of our activities implies that we have an impact on society and the environment. In most cases this impact will be positive, for example when we are involved in creating infrastructure, making land safer or facilitating the transition to renewable energy sources such as offshore wind. However, a potential negative impact during the execution of projects cannot be ruled out. Environmental risks include the impact on biodiversity in vulnerable ecosystems and the emissions produced by our vessels. Boskalis has developed the innovative Building with Nature program and has an in-house engineering department to address ecological aspects from the early tender stage through to monitoring during execution. CO 2 emissions are measured and reported and Boskalis is seeking means by which it can reduce its emissions footprint. Social risks include the impact of projects on local communities. The extent to which our activities have a social impact is highly dependent on the type and/or location of a project. Where relevant, we implement a social impact program and work with our clients to mitigate the impact and where possible make a positive contribution to communities affected by our activities. CLIMATE CHANGE RISKS As mentioned, climate change adaptation and the energy transition will require major investments in infrastructure with signifcant additional opportunities for Boskalis. There are nonetheless several associated risks that could negatively impact our operations. For instance, further restrictions on emissions or increased carbon pricing could result in higher production costs. The increase in frequency and severity of extreme weather events may result in disruptions in project execution. Temperature increase and extreme weather events could also reduce economic activity and GDP

growth. Rising climate change concerns may lead to additional regulatory measures which can result in project delays or cancellations. Such concerns also have the potential for a deteriorating relationship with the public and governments in countries where we operate. ICT RISKS Like most companies, Boskalis is faced with an increase in cybersecurity risks and increasingly sophisticated levels of computer crime. Successful cyberattacks can result in signifcant costs as well as other negative consequences including reputational damage, remediation costs and other liabilities to stakeholders. Furthermore, enhanced protection measures place additional fnancial and operational burdens on the business. To help mitigate these risks Boskalis has developed information security policies and practices based on the international Code of Practice for Information Security Management. During the year under review we continued the monitoring of suspicious activity on our ICT infrastructure as well as our (training) efforts to increase the awareness of cybercrime risks amongst our staff. We requested a third party to conduct a cyber security assessment. Additionally, we continued developing initiatives to comply with the guidelines on maritime cyber risk management as issued by the International Maritime Organization which will take effect in 2021. LOCAL WORKING CONDITIONS RISKS Local management on projects and operations must have a proper understanding of the local (working) conditions. The scale of local operations is often too small to warrant a full-fledged organization, including extensive support services and staff departments. This is addressed through regular visits by responsible managers and employees from the relevant business units and support from central staff departments at head offce as well as by involving (local) external advisors. POLITICAL AND CREDIT RISKS These include risks related to unrest or disruption due to political developments and violence, and the risk of non-payment by clients. Boskalis operates strict acceptance, credit and hedging policies with respect to political and payment risks. Other than in the case of very strong, creditworthy clients with an undisputed credit history, all substantial credit risks are normally covered by means of credit insurance, standby letters of credit, bank guarantees and/or advance payments. Revenues and earnings are only recognized in the accounts where there is suffcient certainty that they will be realized. LIQUIDITY AND FUNDING RISKS As is customary for a contractor, Boskalis also has signifcant obligations outstanding in the form of guarantees from banks and insurance companies, mainly in favor of clients. Given that the availability of suffcient credit and bank guarantee facilities is essential to the continuity of the business, Boskalis’ funding policy is aimed at maintaining a strong fnancial position. Solid balance FINANCIAL RISKS

ANNUAL REPORT 2019 – BOSKALIS