EDF / 2019 Universal registration document

2. Risk factors and control framework Gestion des risques et maîtrise des activités

Reference frameworks The accounting standards used by the EDF group (the scope of the Group’s consolidated financial statements are included in the appendix to the consolidated financial statements [see section 6 “Financial statements”]) comply with the international standards published by the International Accounting Standards Board (“IASB”) approved by the European Union and applicable as at 31 December 2019. These international standards include the IAS (International Accounting Standards), IFRS (International Financial Reporting Standards) and the SIC and IFRIC interpretations. The accounting rules and methods are specified in the Group’s accounting principles manual and summarised in the notes to the consolidated financial statements. The principles applicable to the preparation and reporting to the Group’s Finance Department are defined in the Accounting and Financial Reporting policy. The specific internal control provisions are described in the Group guideline entitled “Accounting and Financial Internal Control”, and the control objectives to be implemented in the entities are specified and updated each year in the Group’s Internal Control Guide. The Finance Management Directors of the Departments of the Business Lines and Subsidiaries sit on the Management Committee of the entities to which they belong. With the exception of the operators of regulated infrastructure, they are appointed and evaluated jointly by operational management and the management of the Management Control function. A network of correspondents from the operational Departments and subsidiaries facilitates dissemination of the instructions and harmonised implementation throughout the various Group entities. Each EDF operational and functional Director makes a commitment each year with regard to the quality of the Internal Control system in the Accounting and Financial areas, the improvement goals for the coming period and the truthfulness and exhaustiveness of the accounting information for which they are responsible by preparing a commitment letter sent to the Group Accounting and Tax Director. In return, each Director receives a letter of appreciation of accounting and tax quality from the Group’s Accounting and Tax Director based on the various elements of assessment (results of internal controls, indicators of the accounting quality dashboard, letter certifying the compliance of the CSP2C accounts, specific actions) to highlight the progress made and determine the improvement actions to be undertaken or continued. An indicator reference framework is used within EDF. It makes it possible to measure areas of conformity of the accounting information for each process. With regard to subsidiaries, each legal entity is responsible for the implementation of the Group’s Accounting and Financial Internal Control Directive. Procedures for preparing and controlling the consolidated financial statements The consolidated financial statements are prepared by the Consolidation Department of the Consolidation Accounting Division on the basis of data entered locally by each entity (parent company entities and subsidiaries) in accordance with Group standards and closing instructions, following a single chart of accounts. The scope of consolidation is closed after noting all companies of significance that are controlled, jointly-controlled or under significant influence. The non-significant nature of entities for which EDF holds an interest and which might fall within the scope of consolidation is examined regularly and submitted annually for the assessment of the Statutory Auditors. The half-year consolidated financial statements are presented to the Audit Committee and then approved by the Board of Directors. The annual consolidated financial statements are reviewed by the Audit Committee, then closed at 31 December of the fiscal year by the Board of Directors and lastly approved by the Shareholders’ Meeting. Each half-yearly and annual closing gives rise to the preparation of instructions specifying the main deliverables expected from each party involved in the publication of the financial statements as well as the preparation of the management report and the Universal Registration Document (URD) for the annual financial statements. Meetings with EDF departments and the subsidiaries facilitate the preparation of these financial statements and make it possible to anticipate changes with regard to certain treatments thereby increasing the reliability of the accounting and financial information published. An analysis of the conditions of preparation (compliance with deadlines, quality of information, etc.) after the event allows for regular improvement of the consolidated financial statements preparation and analysis process. Monthly reporting of information on the balance sheet accounts and the income statement can anticipate the processing of complex operations and contribute to making the results more reliable. Forecasts and management acts are implemented using a single reference framework and tools shared between accounting and management. This system contributes to

the coherence of Group management and facilitates dialogue at all levels of the organisation and helps promote exchange of information between actors and the quality of the information produced. Procedures for preparing and auditing the corporate financial statements The corporate financial statements are prepared annually and semi-annually by the Parent Company Financial Statements Department of the Accounting Consolidation Division. The annual corporate financial statements are closed on 31 December of the fiscal year, approved by the Board of Directors of EDF and then approved by the Shareholders’ Meeting. The condensed half-year corporate financial statements are closed on 30 June of the fiscal year by the Board of Directors. EDF’s transactional accounting (excluding the Nuclear Fuel Division, the Insular Energy Systems Division, the Decommissioning and Waste Projects Division and the Executive Talents Training Managers Department for the payroll accounting aspect) is entrusted to the Shared Accounting and Consulting Services Center (CSP2C) of the Tertiary Services Department, which also handles the transactional accounting for certain French subsidiaries. The processing of transactional accounting is organised by process. “Governance pacts” set the respective responsibilities of the Operational and Functional Departments, of the shared “Accounting” services centre or, where applicable, the accounting operators in the operational business lines and the Accounting Consolidation Division. Meetings are organised on a quarterly basis with the EDF departments to prepare the financial statements and anticipate changes with regard to certain treatments to increase the reliability of the accounting and financial information published. Crisis management and business 2.1.2.5 continuity Natural disasters (floods, landslides, earthquakes, etc.), significant climatic variations (droughts, etc.) or any other event the scope of which is difficult to predict (pandemic, major industrial accident in the world, etc.) could affect the Group’s activities; this was the case with the storms Klaus (2009), Xynthia (2010), Amelie (2019) in metropolitan France, or Irma (2017) in the West Indies, or with episodes of extreme cold (winter 2017) or heat waves (summer 2019). In the event of an exceptional incident, the measures adopted may generate costs beyond those of repairing the damage caused by the disaster and the loss of earnings from the interruption of the goods and services provided by the Group. For example, the coronavirus epidemic that appeared in China in December 2019 might affect the health of employees and service providers, the Group’s operations and projects, as well as its financial position (see section 2.2.6 below). To meet this risk, EDF has defined a crisis management policy that takes into account the Group’s territorial presence and the importance of the Group’s electricity business in the economy. This crisis-management and business-continuity policy defines the organisation principles and specifies the entire system necessary to its implementation. This policy consists in particular of: making sure of the existence of organisations for crisis management and ■ permanent systems for raising alerts; checking the existence and regular update of relevant crisis-management ■ procedures, with regard to the risks involved; defining, for periods of crisis, coordination procedures with all stakeholders; ■ ensuring feedback from crises and crisis exercises is systematically applied in ■ order to avoid or reduce the consequences of similar crises; checking the existence of business continuity plans within each entity; ■ checking the implementation of professional development actions for all players ■ in the crisis. A crisis exercise programme allows these mechanisms to be tested in terms of their effectiveness and overall consistency. In 2019, the crisis management organisation was strengthened on the cyber crisis side, notably with the creation of an EDF CERT and the setting up of a specific cyber crisis unit. Insurance 2.1.2.6 In order to protect its assets and limit the impact of certain events on its financial position, the EDF group has dedicated insurance programmes that cover its major risks in terms of property damage, civil liability and insurance of persons. Nuclear risks are subject to the specific civil liability regime described below.

107

EDF | Universal registration document 2019