GROUPAMA / 2018 Registration document

RISK FACTORS AND RISK MANAGEMENT RISK FACTORS

For more information, refer to Note 46 – Commitments received and given to the consolidated financial statements.

subject to different regulations, have multiple distribution channels and offer alternativeproductsor more competitiverates than those of the Group. Under this competitivepressure, Groupamamay need to adjust its pricing on some of these products and services, which could adversely impact its ability to maintain or improve profitability and negatively impactits net incomeand financial position. Regulatory changes and reform 5.1.4.2 at the local, European and international level The Group’s business is subject to detailed and comprehensive regulation and supervision in the countries where it operates in respect of group’s equity and reserve levels, solvency standards, distribution practices, concentrations and type of investments, rules for consumer protection and customer knowledge, and the rates of revaluationof life insurance products. This regulation and supervision have been strengthened in the context of the financial crisis, both in Europe and internationally.A set of measures to reform the European System of Financial Supervision (ESFS) has been put into place, especially since late 2010. As a result, organisations such as the European Systemic Risk Board (ESRB) and the European Insurance and Occupational Pensions Authority (EIOPA) may issue guidelines and recommendations that could affecthe Group. There are also recommendationsand proposals issued or issuable by the Financial Stability Board (FSB) that may impact the regulation of financial groups in terms of capital, solvency, corporate governance,and executivecompensation. More specifically, the implementation of the 2009 European Directive on the taking-upand pursuit of the business of Insurance and Reinsurance (Solvency II), amended in 2014 by Directive 2014/51/EU (Omnibus 2), which entered into force on 1 January2016, aims to establish a solvency scheme better suited for the risks incurred by insurers and to construct a system common to all European Union members. In pursuit of these objectives, the method for calculating insurers’ capital requirements is regularly reviewed, with the next review expected in 2019 for implementationin 2020. The approach is based on three pillars: Pillar 1 on quantitative equity requirements and rules for measuring assets and liabilities and capital requirements, Pillar 2 on requirements for governance and managementof risks incurred by insurers particularlywith the requirement for insurers to conduct an Own Risk and Solvency Assessment (“ORSA”) and communicate the results to the supervisor as part of prudential supervision, and Pillar 3 on reporting andtransparency requirements.

Operational failures or inadequacies 5.1.3.7 The causes of operational failure or inadequacy inherent in the Group’s business may be human, organisational,material, natural or environmental in nature and result from events or factors that are internal or external to the Group. The operational risk that this poses may manifest itself in various ways, including: failures or malfunctions of Groupama’s information systems; business interruption of its vendors or of the financial intermediaries with which the Group works; error, fraud or misconduct by staff, policyholders or intermediaries; breach of internal or external regulations; orhacking or pirating of information systems. Faced with the emergence of cyber risks stemming from globalisation and an ever-increasing digitisation of management processes, which increasingly exposes the IT system of the Group’s companies to attacks of all kinds (theft or destruction of data, denial of service), the measures taken to counter these attacks consist in reinforcing the protection of informationsystems and the training of users, detecting attempts to intrude, and then limiting the consequences of anattackwith a rapid reaction. Generally speaking, Groupama takes extra care to ensure the maintenance, efficiency and modernisation of its information systems in order to integrate and respond to changes in technological, industrial and regulatory standards and customer preferences. In the event of a breach or failure in quality, Groupama might be unable to obtain the information it needs to run its business or meet its customers’ expectations, which could expose it to litigationor claims orincrease its litigationand regulatoryrisks. Although the Group strives to manage all of these operationalrisks as effectively as possible in order to reduce their potential impact (see section 5.2.6.1 of this registration document), these risks could lead to financial loss, loss of liquidity, business disruption, regulatory sanctionsor damageto Groupama’s reputation.

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5.1.4

RISK FACTORS RELATING TO THE DYNAMIC REGULATORY AND COMPETITIVE ENVIRONMENT

Heightened competition 5.1.4.1

Groupama operates in a market challenged by various players (insurance companies, mutual funds, protection institutions, commercial and investment banks, investment funds, asset management funds, private equity funds, etc.), which may be

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REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES

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