Boskalis Annual Report 2018

ANNUAL REPORT 2018 – BOSKALIS 55

postponements or substantial reductions in the scope or size of contracts are quite rare, they do occur, certainly in markets that are under severe pressure. Consequently, if such a cancellation or substantial reduction occurs, losses may arise from the unwinding or settlement of fnancial derivatives which were taken out to hedge related currency risks and/or fuel price risks, but for which the underlying transaction or cash flows will no longer be realized. Boskalis deals with a variety of competitors in the various markets and submarkets in which it operates. Such competitors vary from large, internationally operating companies to more regional and local companies. A considerable part of our revenue is derived from contracts awarded through public or private tender procedures, with competition often being predominately price-based. However, other factors – such as the assurance of adequate safety, social and environmental practices as well as the fnancial resilience of the contractor – are also regularly taken into consideration when awarding contracts. Proper decision-making processes have been put in place for the submission of tenders to ensure that the risks associated with the execution of a specifc project are systematically identifed and assessed. A substantial part of Boskalis’ activities are capital-intensive which means that prices in these markets are largely influenced by the utilization rate of the relevant equipment at a given time. This implies that a broad international presence along with a leadership position in terms of type and quality of equipment and cost competitiveness are key success factors. Boskalis places a great deal of emphasis on

these, both as a critical point of attention in operational management and in its capital allocation decisions. Consequently, individual investment proposals are subjected to a thorough evaluation and approval process. In the course of executing its strategy, Boskalis also regularly acquires companies. To achieve the anticipated results, Boskalis attaches great importance to integrating such acquisitions with care. Creating value for our stakeholders and retaining key personnel are important elements in this process. CONTRACTING AND EXECUTION RISKS The main operational risks for Boskalis are related to the contracting and execution of projects. For most of our contracting activities the common type of contract is fxed price/lump sum. Under this type of contract, the contractor’s price must reflect virtually all the operational risks as well as the (cost) risks associated with the procurement of materials and subcontractor services. Typically, it is not possible to charge clients for any unforeseen costs. Furthermore, many contracts include milestones and associated penalty clauses for if the milestones are not achieved on time. That is why great emphasis is placed on identifying, analyzing and quantifying such delay risks and the associated operating costs during the tendering process and the preparation and execution phase of a project. OPERATIONAL RISKS

The record-breaking transport of the 90,000-ton FPSO P-67 by the BOKA Vanguard