BIC_REGISTRATION_DOCUMENT_2017

GROUP PRESENTATION Risk factors

1.6. Risk factors

INTRODUCTION The BIC Group pursues an active and dynamic approach to risk management. The objective of this approach is to enhance the Group’s capacity in identifying, managing, mitigating and monitoring key risks that could affect: the Group’s personnel, assets, environment, customers, ● Shareholders or reputation; the Group’s ability to achieve its objectives, abide and defend by ● its Values, ethics or laws and regulations. This approach is based on identification and analysis of the main risks to which the Group is exposed, particularly those related to the following areas: financial markets, legal, industry and environment, strategy and operations and including product safety. A description of the risk management system is disclosed in section 1.7 "Risk management and internal control procedures implemented by the Company" – page 32. The risk factors set out below are not the only risks faced by the Group. Additional risks and uncertainties of which the Group is currently unaware or that are currently deemed not significant could also have an adverse impact on its business, financial position or results. The Group has put in place several measures to mitigate the risks it is facing. One of them, described at the end of this section, is transferring the risks by insuring them.

Strategic and Operational Risks

Risks related to Group acquisitions Risks related to competition

Risks related to the concentration on developed markets Risks related to experienced employees and skills Risks related to anti-smoking measures Risks related to manufacturing sites Risks related to IT and technology Risks related to reputation and brand Counterfeit Regulatory (Lighters – Stationery)

Other Special Risks

DESCRIPTION OF THE MAIN RISK FACTORS

Market risks

Foreign Exchange risk The Group’s main currency exposure is the euro-U.S. dollar rate. In 2017, the yearly net exposure for commercial flows (352.1 million U.S. dollars) was hedged at the average rate of 1 EUR = 1.1169 USD. The significant volatility on Foreign Exchange markets leads us to be particularly vigilant throughout the year on any arising element that would affect our Foreign Exchange exposure. Our exposure control and follow-up tools allow us to collect the most accurate and up-to-date information and make sure we constantly capture the most precise picture of our Foreign Exchange risks. Group Treasury has adequate means to rapidly identify the risks and reliable tools to manage the exposure. As a result, we are able to react efficiently to elements impacting our exposure. Regarding the 2018 exposure, as of December 31, 2017, 90% of identified exposure was hedged with forwards or options. The average hedged rate for 2018 is 1 EUR = 1.13 USD. Concerning the other major exposures of the Group, the 2018 hedge ratio, as of December 31, 2017, is between 80% and 100%. See also Note 24 to the consolidated financial statements, page 215-216.

LIST OF THE MAIN RISK FACTORS

Market Risks

Foreign Exchange risk Interest Rate exposure Counterparty risk Liquidity risk

Legal Risks

Facts leading to procedures Procedures (governmental, judicial, etc.)

Industrial and Environmental Risks

Industrial Risks Risks related to the environment Risks related to climate change

24

BIC GROUP - 2017 REGISTRATION DOCUMENT