Market and competition risks
The Boskalis markets are heterogeneous and often develop in different ways.
Boskalis aims to respond as well as possible to both positive and negative developments in individual market segments through a global spread of activities, an extensive, versatile, and internationally based fleet, and strong positions in the home markets. Moreover, the dredging industry is largely focused on the maintenance and development of infrastructure. This means that longer-term developments will generally be more important than short-term economic fluctuations.

The Boskalis order book includes contracts only when agreement has been reached with the client.

Boskalis deals with large, internationally operating competitors, and with more regional or local
competitors with activities restricted to one or several submarkets.

In most cases, projects are brought to the market using public or private tender procedures. Competition is mostly price-based. The dredging industry is a capital-intensive industry with high entry and exit barriers, particularly for companies operating in the international arena.
Prices are influenced considerably by the relation between the demand for dredging services and the
available capacity or utilization of the equipment. Broad international spread of market positions, andequipment and cost leadership are therefore key success factors upon which Boskalis places a great deal of emphasis, in terms of investment strategy and as a critical focal point in operational management.The solid financial position also provides a strong basis for absorption of risk.

Operational risks
On the markets where Boskalis operates, ‘fixed price/lump sum’ is still the most common type of
contract. In this type of contract, the contractor must include nearly all the operating and (procurement) cost risks in the price.

Boskalis focuses on controlling those risks, first of all by adopting a structured approach in the tender phase to identify risks and their possible consequences. The results of the risk analysis are then used as a factor in the determination of the cost price and/or selling price, and in the drafting of tender and/or contractconditions. When a contract is awarded, the updating of the risk analysis is part of the thorough project preparation process, resulting in concrete actions where necessary. In addition, there is a strong focus on staff training, schooling, and refresher courses, a certified quality and safety program, and optimal maintenance policies to keep equipment in good condition. Some risks are also insured if possible.

The key to the professionalism and skills of Boskalis lies in its ability to manage operating risks
effectively and responsibly.

Financial risks
Boskalis is exposed to both operating and financial risks associated with project execution. The main financial risks are disruption by political developments, violence, etc., and the risk of non-payment by clients. Boskalis has a strict risk acceptance and hedging policy for political and payment risks. Unless first-class, creditworthy clients are involved, these risks are in principle covered by credit insurance, bank guarantees, advance payments, etc. Turnovers and profits are only accounted for when realizations sufficiently certain.

As is usual in the contracting industry, Boskalis also has large amounts outstanding in the form of bank guarantees or surety bonds (guarantees from insurance companies), usually in favor of customers.

Boskalis’ policy is to maintain a solid financial position since adequate credit, and particularly bank guarantee facilities, are essential to an uninterrupted conduct of business. The company has ample credit and bank guarantee facilities at its disposal.

For a detailed description of risk management at Boskalis, see the Corporate Governance chapter in the 2009 Annual Report.

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