Risks Relating Specifically to SMi  Annual Report  2013  Management Discussion & Analysis 36  Our Private Company Partners rely on key personnel How a Private Company Partner is leveraged may have adverse consequences to them  RISKS RELATING TO ALL OF OUR PRIVATE COMPANY PARTNERS, GENERALLY  Conducting Business in  Countries Prone to Political  Instability, Corruption and  Civil Unrest  SMi conducts business in countries which are prone to political instability, corruption and civil  unrest. Any of these could lead to a negative impact on SMi's revenue and cash flow if they affect  the business in any way. Geographic Revenue  Concentration  A significant amount of SMi's revenue is generated in the province of Quebec. SMi's business  could be impacted if the Province of Quebec is affected by a prolonged period of stagnant or  contracting economic activity; significant or prolonged bad weather or; the implementation of  regulations which significantly impacts the industry in which the SMi operates, to name a few.  Quebec's Regulatory  Environment  As a result of the unethical business practices of certain construction and engineering firms in  Quebec, and the Charbonneau Inquiry which followed, certain regulations have been put in place  to deter and prevent unethical business practices, specifically the need for Autorité des marchés  financiers (" AMF ") certification to bid on public projects larger than $10 million in size. If SMi is  not able to meet the requirements regulators have put in place it could have an impact on its  business. SMi currently does not bid on public projects greater than $10 million in size. Therefore,  AMF certification is not critical to its business. Notwithstanding the foregoing, SMi has applied for  AMF certification and feels strongly that they will be granted the certification when the AMF begins  to grant certifications to construction and engineering firms in Quebec. A failure to obtain such  certificate could limit SMi's future growth.  Balance Sheet  SMi needs to maintain a healthy balance sheet in order to continue to bid and be awarded larger  contracts as many larger contracts require performance guarantees or letters of credit. A decline  in credit worthiness could affect its ability to obtain these financial instruments which in turn could  affect its ability to generate new revenue.  Unethical behavior by  Consortium Partners  SMi periodically bids on projects as a part of a consortium. If any member of the consortium  partakes in unethical business practices, or is accused of corruption of any kind, it could have a  negative effect on SMi's reputation as well as its financial position.  Failure to replace legacy  contracts  SMi relies on revenues generated from long term contracts to fund the operations of SMi as well  as the distributions payable to Alaris. New contracts to replace this legacy revenues are sought  out and entered into frequently. However, if SMi fails to replace the revenue from a significant  legacy contract following its completion or termination it could affect its ability to fund the  distribution payable to Alaris, as well as other commitments and operations.  In addition to the risks relating specifically to our material Private Company Partners (being KMH, Killick, Quetico, Labstat, SCR,  Sequel, and SMi), there are several other risks which impact all of our current and future Private Company Partners collectively, which  if realized, could have a material impact on our operations and financial condition, as described below.  Leverage may have important adverse consequences on our Private Company Partners. Private Company Partners may be subject  to restrictive financial and operating covenants. Leverage may impair our Private Company Partners ability to finance their future  operations and capital needs. As a result, their flexibility to respond to changing business and economic conditions and to business  opportunities may be limited. A leveraged company's income and net assets will tend to increase or decrease at a greater rate than if  borrowed money was not used. Often, the success of a private business depends on the management talents and efforts of one or two persons or a small group of  persons. The death, disability or resignation of one or more of these persons could have a material adverse impact on a Private  Company Partner's operations or ability to access additional capital qualified personnel, expand or compete.