HERMÈS - 2019 Universal Registration Document

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OVERVIEW OF THE GROUP RISK FACTORS

FINANCIAL RISKS RELATED TO CHANGES IN, COMPLEXITY AND INTERPRETATION OF TAX REGULATIONS ●

1.11.5.4

DESCRIPTION OF THE RISK s

RISK MANAGEMENT s

The Group provides regulatory oversight and defines its tax policy by relying on a team of tax experts under the supervision of the Executive Vice President Finance, assisted by external advisers if necessary. The Group is committed to respecting all applicable laws and regulations in each of the countries where it operates. It relies on transparent and simple organisation. The Group’s tax policy is not based on any tax optimisation or evasion scheme and complies with the principles laid down by the OECD. In the case of a dispute or differences in interpretation, the Group may have to challenge reassessments with the tax authorities and to seek redress using the means available to it for its defence. the transport of products between production sites and to the 3) distribution network. A policy has been taken out with Chubb; responsibilities in relation to the environment. This policy was 4) renewed with AIG Europe on 1 January 2019 for a period of 36 months. The coverage limit is €15 million per claim and €25 million for the period, and the deductible thresholds are €25,000; cyber risks. The policy with Zurich Insurance and other prominent 5) insurers was renewed for a period of one year, covering the reconstruction of data, operating losses following a security incident, civil liability, and costs, notably defence and notification costs. Other contracts have been subscribed to fulfil specific requirements, particularly in the context of building operations (new work or renovation) carried out as project managers. Moreover, the Hermès Group has for many years subscribed to third-party liability insurance for Corporate Officers with AIG Europe and other prominent insurers, in amounts deemed appropriate for our business. In 2019, these policies were not the subject of significant claims.

The Group is exposed to financial risks related to changes in tax regulations or their interpretation in the countries where it operates. POTENTIAL IMPACTS ON THE GROUP s Any change in tax regulations involving and increasing taxes and duties, mainly income taxes, custom duties, withholding taxes, particularly concerning goods and financial flows (interests, dividends)… could have a negative impact on the Group’s results. 1.11.6 In line with the Group risk analysis, the Hermès Group’s policy regarding insurance is to transfer any exposure that is liable to produce a material impact on profits to the insurance market. The Group insurance programmes represent most of the insurance coverage for the subsidiaries. They are placed via the intermediary of brokers who are amongst the ten largest French brokers and with first-rate insurance companies. The main international insurance programmes favour an “all risks except” approach and cover: property damage and operating losses that may affect production 1) sites, logistics centres, distribution centres or premises in France and in other countries. The policy underwritten by FM Global was renewed for a one-year term. The upper cover limit is €500 million. The deductibles for direct damage vary from €15,000 to €250,000 and from €70,000 to three days’ gross profit for operating losses. In Japan, the Group has had an earthquake insurance policy for several years covering €40 million in direct damage and operating losses. This insurance is accompanied by a prevention/engineering component: 75 production and distribution sites were the subject of a prevention inspection in 2019. The recommendations issued are monitored using a stringent, formally documented system. This policy has been renewed for 2020, with the same levels of coverage; civil liability for damages to persons, property and intangibles caused 2) to third parties in the conduct of business operations or by products. These policies were taken out for two years at 1 January 2019 with AIG Europe and Zurich Insurance for cover amounts which take into account the nature of the Group’s operations; the maximum cover per event is €100 million, and the deductibles vary from €1,000 to €10,000; INSURANCE POLICY AND RISK HEDGING

INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS ESTABLISHED BY THE COMPANY

1.11.7

The internal control and risk management systems relating to the preparation and processing of accounting and financial information are described in section 1.12.

2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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