Groupe Renault - 2019 Universal Registration Document

RENAULT: A RESPONSIBLE COMPANY

ANNUAL GENERAL MEETING OF RENAULT ON APRIL 24, 2020

GROUPE RENAULT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

RENAULT AND ITS SHAREHOLDERS

ADDITIONAL INFORMATION

RISK FACTORS

All decisions regarding the geographical location of manufacturing operations are taken in a context of an overall Group growth strategy that mitigates the risk of instability through a global industrial approach in order to ensure a diversification of risks. Manufacturing investments represent a major part of the Group’s exposure to political risks. Country risk related to manufacturing and financial investment is in principle not hedged, but the risk of non-achievement of objectives is included in the expected profitability calculation. From an operational standpoint, the Group continuously increases the local integration of its production facilities to reduce political and foreign exchange risks and thus make them more competitive. In general, the geographic breakdown of the Group’s sales makes it possible to limit the global impacts of regional hazards and take advantage of opportunities. The Group hedges against the risk of non-payment for most payments originating from high-risk countries. The main exceptions relate to intra-group sales, sales to industrial partners and to certain countries for which there is no possible hedging. Residual country risk is regularly monitored. In order to centrally manage the risk of non-payment and put in place hedges on competitive terms, the Group has designed a “hub and spoke” invoicing system. Manufacturing subsidiaries sell their exported production to Renault s.a.s., which sells it on to commercial subsidiaries and independent importers, granting them supplier credit. The associated risk is managed by the parent company. Some sales between countries covered by customs agreements do not use this system, however. These general principles are illustrated and complemented by specific actions: Europe The Group’s activities remain highly dependent on the European market, which accounts for about half of the Group’s sales. Americas In a volatile political and economic environment that has had a significant impact on exchange rates, particularly in Argentina, the Americas Region has deployed an industrial, commercial and organizational action plan that has offset most impacts of external origin. Subsidiaries benefit from an optimized structure that, if necessary, makes it possible to handle new turbulence in 2020 or benefit fully if there is an economic recovery. Africa, Middle-East, India, Pacific Shipments of components to Iran have been completely halted since early August 2018 following the reinstatement of US sanctions. Restrictions on foreign exchange allocations by the central bank have also led to the shutdown of built-up imports. In Algeria, the evolution of the context and measures under which the Group is able to carry out its local production are the subject of particular attention.

Eurasia In Russia, the Group manages the fluctuations of the economic environment very closely. Stronger local integration also remains a priority at all production sites. In Turkey, the economic situation increased the volatility of the automotive market and the Group’s local sales. The devaluation of the currency, however, creates export opportunities in terms of volume and profitability. The risk regarding debt owed by Renault Ukraine to Renault s.a.s. is partially covered by credit insurance. Risk of supply chain performance failure The Group’s activity relies to a large extent, for its Products business, on a complex supply chain system, upstream and downstream of its production sites. Different components of this supply chain could fail, potentially leading to technical, scheduling or financial inefficiencies, even interruptions of production and/or delivery of vehicles to the distribution networks and end customers, with negative impacts on Group’s sales, revenues, profits or even customer satisfaction. These potential failures could be either internal, due to the underlying interdependence of the Group’s industrial networks, or external, and break down under the following types: failure in supply of raw materials; P supplier default; P failure in supply or transport systems. P Failure in supply of raw materials Risks identified concern potential restrictions on the supply of raw materials due to an imbalance between supply and demand, sourcing issues or geopolitical disturbances, and the prices of raw materials for which variations may be sudden and major. Certain raw materials are considered strategic, since any restriction in the supply chain could impact production conditions. In order to keep internal management bodies informed in this regard, a strategic area of expertise called “Energy and Raw Materials Strategy” was put in place by the Group in 2010. In particular, Groupe Renault has developed a methodology to objectively classify the critical nature of raw materials based on: price change risks: P Renault uses several means to guarantee price stability over the financial year. The first consists of contracting purchasing prices at fixed prices over periods covering several months for materials not indexed on the financial markets. The second is to hedge risks linked to indexed materials. In order to closely monitor changes in raw material prices and examine future trends, a joint Alliance ad hoc committee, the Raw Materials and Currencies Committee (RMCC) has been tasked with defining the guidelines to be used as a reference. In addition, a Raw Materials Operational Committee deals more specifically with operational issues relating to the purchasing of raw materials for Renault.

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GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2019