RISK MANAGEMENT

Risk management requires a healthy balance between entrepreneurship and recognizing and managing the risks that are associated with entrepreneurship. In this sense, risk management must be firmly established at all levels within the organization. Important elements of risk management are explained below. For more information, please refer to the Company's website. Although risk management and control systems receive considerable attention, it cannot be excluded that the above-listed risks or other risks have a material impact on the Company.

Management and supervision
Important for good risk management are (adherence to) internal control systems and approval levels for submitting bids, entering into financing arrangements or long-term obligations such as rental agreements or leases, pledging securities and making investments and acquisitions. The responsibilities and authority of the management of an operating company are established in a management charter.

The status of business results, as well as identified risks and their management and control, is discussed each quarter. In between, reports are filed on working capital and the cash position. Regular communication with the various operating companies' managements occurs so that operational processes and the associated risks are understood. Yearly, the management of each operating company provides a letter of representation that is to be attached to the annual financial statement.

Through discussions about the quarterly results, the strategic plan and the annual budget, the Supervisory Board monitors the Company's progress and the management of its risks. The Audit Committee of the Supervisory Board monitors compliance with the financial regulations, the quality of the financial reports and the effectiveness of the internal control systems. In relation to the Sarbanes- Oxley Act, ARCADIS' internal control processes are being reviewed and evaluated for their effectiveness.

Portfolio policy and account management
Having a balanced portfolio, distributing activities by categories of client, market sectors and countries, can reduce vulnerability to market risks. To maintain this balance, ARCADIS actively manages its portfolio of activities, both for the overall Company and in the different operating companies. With this strategy, the Company seeks to grow in areas that create more added value, while reducing activities with lower than average returns. Account management has been introduced in many areas of the Company, enabling an early response to anticipated changes in the set of contracts.

Information systems
Adequate information about Company procedures is essential for risk management. ARCADIS' financial reports are produced in accordance with guidelines that are established in the "Accounting Manual." This manual is regularly updated with the internal procedures and the accounting standards that apply in ARCADIS. Financial reports are filed quarterly. Operating companies produce a profit and loss report monthly and a more frequent summary of order intake and billability to be able to react rapidly to developments.

Project management
Project management plays a central role in managing risk and applies to every phase of a project: from preparing the bid to delivering the product. The responsibility for risk management lies first with the project manager. In the bidding phase, there are approval requirements dependent on the scope and/or the risk profile of the project. The progress of a project is assessed regularly; this assessment is conducted by the project manager and at least one other expert or manager. Many operating companies have quality systems that include specific procedures for risk management.

Human Resources Management
Education and training
Because project managers, in particular, play a key role in risk management, specialized educational and training programs have been implemented. In addition, greater emphasis has been placed on increasing the expert knowledge of specialists and other employees.

Flexibility
To be able to respond rapidly to changing markets, flexibility in staff training is essential. Depending on the statutory regulations regarding the employment market, various standards and instruments are used to be able to respond to changes in the contract portfolio.