The risk of service provider failure is handled by tracking service provider performance and stipulating and enforcing strict contractual requirements, especially in terms of service availability and continuity.

The risk of losing a license needed to do certain business in certain countries is managed locally by executive management of the subsidiaries.

The risk of disruption to certain business lines following Brexit on December 31, 2020 was anticipated by setting up a subsidiary in Belgium. This subsidiary obtained an e-money issuer license in July 2019, enabling it to issue and distribute e-money via Group subsidiaries in all countries offering e-money or payment service-type solutions.

 

4.1.5.2 Voucher fraud risks

Risk

The Group is exposed to the risk of voucher forgery and the fraudulent use and theft of paper, card and/or paperless vouchers.

In the case of paper vouchers, risks mainly relate to the distribution of fake vouchers, voucher forgery and voucher theft. For example, the Group may be asked to accept forged or stolen vouchers presented by corporate clients for reimbursement.

In the case of cards or digital solutions, the main risks concern the fraudulent use of card details for online purchases (after the codes have been stolen using e-mail scamming and phishing or by forging cards). Forging cards or “skimming” involves stealing or obtaining card data (by hacking the information system, for example) and then copying these onto another card. The risk of actual card theft is minimal.

Combating the risk of digital solution forgery or theft requires much greater sophistication than for risks associated with paper vouchers. Cases of forgery and theft continued to be extremely rare in 2020 however, the Group continues to be attentive to new types and variation of volumes of fraud incidents, notably due to the human and economic impact of the epidemic.

 

Measures to manage the risk

To limit the risk, the Group continued to accelerate the migration from paper to digital solutions. This was given added impetus by the measures taken to contain the spread of Covid-19. Dematerialization and digital solutions automatically reduce exposure to the risks associated with paper solutions.

In addition, the Group has dedicated resources for integrating fraud prevention and detection mechanisms into digital solutions. Payment instrument and transaction security is being constantly improved through technological improvements, such as by equipping the cards with a smartcard chip, incorporating strong authentication solutions, stepping up security checks at payment terminals or introducing international standards, thereby helping to enhance data security.

At the same time, the Group has resources specifically dedicated to preventing fraud. Awareness raising initiatives were organized for all employees in 2020. The Group also has a policy of purchasing insurance to cover fraud risk, as explained in section 4.3.2 “Risks transferred to the insurance market”, page 79.

 

 

4.2 Legal and arbitration proceedings

In the normal course of business, the Group may be involved or become involved in legal and arbitration proceedings and may be subject to tax or government audits.

Information about legal or arbitration proceedings in progress, pending or threatened that may have, or have had in the recent past, significant effects on the Group’s financial position, business or results of operations is provided in Note 10.3 “Claims, litigation and tax risk” to the consolidated financial statements, page 282.

To the best of the Company’s knowledge, no other governmental, legal or arbitration proceedings that may have a significant impact on the financial position of the Company and/or the Group have been initiated against the Company or any of its subsidiaries.

The method used to provide for or recognize liabilities complies with the applicable accounting standards (see section 7, Note 10.2, page 281).

Provisions for litigation are recorded on receipt by the Group of a notice of claim or summons, based on an assessment of the related risk made by the Group and its advisors. They are presented in Note 10.2 “Provisions” to the consolidated financial statements, page 281

Edenred has not entered into any material off-balance sheet commitments other than those disclosed in Note 11.5 “Off-balance sheet commitments” to the consolidated financial statements, page 286.