HERMÈS - 2019 Universal Registration Document

1

OVERVIEW OF THE GROUP INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES

Internal control system monitoring Regular reviews are carried out by internal control at a local level and are completed by the audit and risk management department depending on the stakes of each entity. The network of internal control managers is responsible for ensuring that the principal risks related to distribution and production operations, as well as to support functions, are covered by suitable controls, notably regarding the security and traceability of assets. This network has been strengthened and now provides dense coverage of internal control within the main entities. As part of its role as coordinator for the network of internal control managers, the audit and risk management department is involved in their appointment; it reviews the subsidiaries’ annual plans, disseminates best practices, notably through a collaborative, company information sharing platform, communicates internal control priorities, and encourages experience sharing between all network members.

The audit assignments represent the third control level. There are several types of audits including: audit of distribution subsidiaries including the audit of stores; s audit of production sites; s audit of upstream or downstream support departments, etc.; s special audit conducted with the help of external firms, in particular s on information systems; support to investments in the setting up of the internal control s system. Upon completion of the audits, reports are prepared containing the audit findings, identifying risks and recommending solutions to remedy any problems. Proper implementation of the recommendations is verified during follow-up audits. The audit reports are sent to the managers of the audited subsidiaries or departments and to Group management.

INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES 1.12

RELATING TO THE PREPARATION AND PROCESSING OF ACCOUNTING AND FINANCIAL INFORMATION

AFR

Pursuant to Articles L. 225-100-1, L. 226-1 and L. 823-19 of the French Commercial Code ( Code de commerce ), the report on the principal risk management and internal control procedures instituted within the Company appears below, using the "Reference Framework” published by the AMF in 2010, AMF position recommendation DOC-2016-05 “Guide to periodic information addressed to all companies listed on regulated markets” and the Afep-Medef Corporate Governance Code revised in January 2020. This chapter has been prepared by the Executive Management with the assistance of the Audit and Risk Committee and the relevant functional departments. Other internal control and risk management procedures are described in chapter 1.11 “Risk factors”.

proper observance of the Group management’s instructions and s strategy directions; operating efficiency of the Company’s internal procedures, particularly s those that help to protect its assets, as well as the safety and security of property and persons; the reliability of financial information and, in general, the internal s control system enables the Company to maintain control over its activities, to enhance the efficiency of its operations and to optimise the use of its resources.

INTERNAL CONTROL SYSTEM FOR ACCOUNTING AND FINANCIAL INFORMATION

1.12.2

The internal control system applicable to accounting and financial information is a key component of Hermès International’s overall management system. It is designed to ensure stringent financial oversight of the Company’s activities. It encompasses all processes involved in producing and reporting accounting and financial information for the parent company and the companies integrated into the consolidated financial statements. It meets the following objectives: the prevention and identification of any accounting or financial fraud s or inconsistencies, as much as possible; the reliability of information circulated and used in-house by Group s management; the reliability of the published accounts and of other information s reported to investors.

OBJECTIVES OF RISK MANAGEMENT AND INTERNAL CONTROL AT HERMÈS INTERNATIONAL

1.12.1

Internal control systems rely on ongoing, recurring actions that are integrated into the Company’s operating processes. They apply to all functions and processes, including those associated with the production of financial and accounting information. The Hermès internal control objectives are to ensure: compliance with laws and regulations; s

2019 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

64