Derichebourg // 2020-2021 Universal Registration Document

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Risk factors and internal control Risk factors

Principal risks identified and the risk management system 2.1.3 The table below details the main risks identified and the systems for managing these risks:

Change ( vs. prev. yr)

Risks

Risk management systems

Pandemic risk

1. The emergence of a pandemic in Europe is likely to significantly reduce the Group’s activities and impact its profitability.

This exogenous risk cannot be controlled. There are however some shock absorbers, including: - the diversity of the business lines in which the Group operates; - State support of the economy. In the event of a serious health crisis the State can take measures to safeguard the survival of economic operators; - State recognition of the status of an essential activity for the Group’s Environmental division As a major player in the circular economy, which helps to protect the planet’s resources, and supplier of raw materials from recycling that help to avoid carbon emissions, the Group believes that it will not be among the companies that will see restrictions on their access to capital markets. This belief is supported by: - the success of its inaugural €300 million Green Bond issue; - the portion of its revenue (68.7%) eligible for the European Green Taxonomy climate change mitigation or adaptation targets (see section 3.8).

Climate risk

2. Some investors may require companies to do more to prevent global warming and its effects. This could have the effect of restricting access to capital markets.

Geopolitical risks and economic cycle-related risks

3. The introduction of customs barriers leading to segmentation of international trade could adversely affect the prices and/or volumes of recycled materials processed by the Group. The industries that consume the products sold by the Group’s Recycling business (steel, metallurgy) are considered to be cyclical. A slowdown in these cycles may affect the profitability of the business. The European and Turkish steel industries rely on the strength of domestic steel consumption in China. When this consumption weakens, the pressure of low-cost Chinese exports increases, and competes with European and Turkish steelmakers. The Group has indirect exposure (China for non-ferrous metals, Turkey for ferrous scrap metals) to countries outside of Western Europe where the Group carries out its principal business activity. A deterioration in the economic situation of these countries may indirectly affect (lower prices or change in trade flows) the business activity of the Group as a whole. 4. Environmental Services’ largest customer represents 19% of its revenue, and the five largest represent around 35%. The financial failure, or a reduction in commercial relations with one of these customers, could affect the Group’s profits.

These exogenous risks cannot be controlled by the Group. A low inventory policy is likely to limit the impact of such situations, as is the policy aimed at protecting unit margins.

A policy of diversifying the Group’s customer base contributes to lowering these risks.

Customer risks

The Group virtually always seeks to insure its trade receivables, to include retention-of-title clauses in its contracts, and for major exports to obtain the bulk of payment before unloading the goods. A customer diversification policy is also likely to reduce this risk. The logistical framework (access to ports) needed for this diversification is in place. Regular high-level meetings are held with major customers in order to assess the level of satisfaction of customers and service providers. A customer diversification policy has been initiated. It is likely to reduce this risk in future.

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Multiservices’ largest customer represents 11% of this division’s revenue. A significant reduction in services provided could affect the Group’s profits.

DERICHEBOURG 2020/2021 Universal Registration Document 42