HERMÈS - 2019 Universal Registration Document

OVERVIEW OF THE GROUP RISK FACTORS

BANK COUNTERPARTY RISK ●

1.11.5.3

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DESCRIPTION OF THE RISK s

RISK MANAGEMENT s

Pursuant to the applicable internal control procedures, the Group only deals with leading banks and financial institutions that have signed FBF and ISDA agreements on trading in forward financial instruments. In addition, counterparty risks on financial transactions are monitored on an ongoing basis by Hermès International’s Treasury department. Finally, the Group breaks down investment transactions, currency risk hedge transactions and deposits transactions in the selected banks within defined limits of amount and maturity. Moreover, the impact of the credit risk as recommended by IFRS 13 in the fair value of derivatives is close to zero for the Group, given that all of the derivatives have a maturity of less than 12 months. The Group follows a conservative investment policy, designed to avoid the risk of capital loss and maintain liquidity in order to be able to implement rapid and independent strategic changes. The Group deals with leading banks and financial institutions only. Most available cash is invested, mainly in money-market mutual funds offered by leading financial institutions, in term deposits and in deposit certificates issued by top-rated banks, for the short term with very low sensitivity. Quantitative information on interest rate risk impacts is provided in Note 25.3 to the consolidated financial statements. The treasury management department constantly monitors changes in legal regulations with regard to investment transactions to ensure that the Group conforms to current regulations. Furthermore, the finance department adjusts its procedures and tools on an ongoing basis to adapt to changes in its environment.

As the Group has a positive cash position and because of its other transactions with banks (exchange rate hedging), the Group is exposed to counterparty risk that is mainly banking-related and is appropriately monitored.

POTENTIAL IMPACTS ON THE GROUP s Financial losses.

2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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