HERMÈS - 2020 Universal registration document

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RISKS AND CONTROL RISK MANAGEMENT, INTERNAL CONTROL AND INTERNAL AUDIT

In 2017, Hermès Group introduced the “Compliance and Vigilance Committee”, comprising representatives of the compliance department, legal department, sustainable development department, industrial affairs department, audit and risk management department, commercial department and human resources department, in order to prepare a duty of care plan for all Group subsidiaries. A Director of Legal Compliance was appointed in 2017. His duties are detailed in section 2.8.1.2.2 of this report. The Senior Executives, the major functional and operating departments, and members of the Management Committees of the Group’s various entities serve as the main conduits for applying internal control and risk management; they are the main beneficiaries of the system and also key contributors to its proper operation. Control activities carried out at the level of each entity fall under the joint responsibility of the Managing Director and Chief Financial Officer, as established by the signature of a letter of representation relating to knowledge of the Hermès internal control objectives and of the quality of the controls implemented within the entity. To this end, they rely on the results of an annual self-assessment questionnaire on the implementation of the internal control system. The Group’s operational staff

activity report to the Audit and Risk Committee. In 2020, most of the audits were carried out in accordance with the audit plan (see the paragraph "Audit Plan" in section 4.3.5).

Internal control managers

Internal control managers oversee the implementation of the internal control system within their scope, métiers , distribution subsidiaries or support functions. They report locally to the Chief Financial Officer of their entity, and functionally to the audit and risk management department. They work according to an annual plan, shared with their department and the audit and risk management department, taking into account the Group’s internal control priorities and the risks specific to their scope. Their main duties are as follows: identify major risks and adapt the organisation of internal control s accordingly; verify the implementation of Group procedures in accordance with the s activity and local regulations; participate in self-assessment of internal control work; s spread the culture of internal control to all employees; s monitor the risk mapping action plans; s follow up on the audit recommendations of the audit and risk s management department; in general, contribute in all their actions to improving risk s management. In 2020, they were also the main contacts to ensure the proper implementation of health measures at Hermès premises. The Hermès Group has deployed specific processes to monitor certain risks through specialised committees or working groups. These committees meet on a regular basis. For example, committees focusing on real estate risks, safety, IT risks and treasury risks analyse the issues, and study the appropriate corrective measures so that they can be deployed in the entities. They also check that existing control systems comply with Group procedures. The main operational contacts involved take part in these committees, as does the audit and risk management department, whose role is to facilitate the identification of risks and associated action plans. Since 2016, the Group Safety Committee has been arbitrating on cross-functional topics of security and monitoring the functioning of the specialised committees. If necessary, it may request interventions on specific subjects from the experts concerned. In addition, an ad hoc committee on the safety of transport, comprising the Group safety department, transport department, insurance department, audit and risk management department and the departments of the métiers concerned was held in 2019 to define actions to improve the safety of product transportation at Hermès. The roll-out of the decided actions continued in 2020. Specialised committees

RISK MANAGEMENT SYSTEM

4.3.3

Major risk identification

Risk re- assessment

Risk ranking

Risk management system at Hermès International

Definition of a risk control strategy

Management of main risks

The Group’s risk management process is based upon the preparation of risk mappings as well as a range of complementary tools that facilitate the identification of risks and help to define the actions necessary to best deal with them.

346 2020 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL