Groupe Renault - 2019 Universal Registration Document

01

RISK FACTORS GROUPE RENAULT

Risks related to cross-group functions

Risks related to the design of products and services Risk factor: postponed launch of new models, which could lead to the loss of potential customers. Main mitigation action: control robustness of main project milestones in order to secure schedules of new product launches. Risks related to purchasing Risk factors: deterioration of local suppliers financial health due to unstable P regulation in the country, market decrease and exogenous factors (raw materials increase and Forex exposure); potential consequences for suppliers are insolvency, bankruptcy, operational disruption (logistic, quality, etc.), and Capex limitation; withdrawal of localized global suppliers from Russian market, and P consequently: risk of decreasing product quality while switching to new local P supplier; The company carries out reinforcement of “Supplier Risk Management” team inside APO in Russia, continues development of common suppliers panel with the Renault-Nissan-Mitsubishi alliance, and searches for alternative suppliers. Risks related to production AVTOVAZ is exposed to the following risks: risk of delivery of substandard components; P production downtime, decrease of production volumes. P In order to reduce risks related to production, the company conducts permanent work to improve its quality management system and carries out control of technical re-equipment and modernization schedules in order to prevent unexpected production downtime. Risks related to sales of products and services AVTOVAZ may be exposed to deteriorations in the financial health of distributors (export market) and interruption of their commercial activity. The company carries out analyses of financial situation of distributors and plans to organize insurance for interruption of commercial activity, to be obtained by distributors. increase in direct import purchases; P dependence on monopolistic suppliers. P Risk mitigation actions:

1.6.2.2 Financial risks Liquidity risk

In order to manage the liquidity risk, the company optimizes the payment process and the technology for settlements with suppliers, uses alternative forms of settlement (set-off of claims), reduces the costs of procurement of auxiliary materials, works and services, reduces inventories and works with suppliers of metal and components concerning price reduction. Exchange risk The company sells and purchases in the domestic and international markets, and is exposed to volatility in exchange rates, mainly for the euro- ruble pair. In the event of a significant increase in the euro against the ruble, the company will take measures to optimize costs and maintain solvency. Interest rate risk During 2019, the Bank of Russia systematically lowered its key rate, a trend which may continue in 2020. The impact from interest rate risk is at this stage not considered significant. In the event however of a significant increase in the interest rate on potential credit resources, the company will take measures to optimize the loan portfolio and maintain solvency. In case of decrease of interest rate, the company will take measures to decrease fixed rate terms. Legal risks AVTOVAZ considers that risks associated with changes in the tax legislation in the near future are not significant. The company regularly monitors changes in the tax legislation of the Russian Federation and foreign countries into which the company exports products in order to take appropriate measures to minimize possible negative consequences. The possible change of customs rules and duties may increase the costs related to purchasing of imported equipment and component parts, imported as well as manufactured by local suppliers in cooperation with foreign partners. To manage this risk, the company regularly searches ways to optimize customs duties for imported equipment. In the course of supplier selection, the company evaluates the share of imported elements in the production of the component/part.

110 GROUPE RENAULT I UNIVERSAL REGISTRATION DOCUMENT 2019

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