HERMÈS - 2020 Universal registration document

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RISKS AND CONTROL RISK MANAGEMENT, INTERNAL CONTROL AND INTERNAL AUDIT

accounting and financial internal control within the operational • entities, external communication of financial information in accordance with • regulations. This is supported by the consolidation, management control and investor relations departments; the Managing Directors and Chief Financial Officers of the s subsidiaries, who have primary responsibility for the quality of the financial information preparation processes and internal control applied by the entities they oversee. They are also responsible for circulating procedures drawn up and issued by Hermès International and for ensuring that these are properly applied. Procedures for preparing published accounting and financial information The procedures that Hermès has implemented for drawing up the financial statements aim to ensure the following: impartiality, objectivity and relevance of published accounting and s financial information in relation to user requirements, compliance with reporting deadlines (through the preparation of a timetable for closing the accounts), and comprehensibility of this information; the definition and distribution to all consolidated entities of s consolidated accounts closing procedures that meet these criteria, namely through the Group Management manuals, and instructions sent to subsidiaries; the traceability of closing accounting entries within a single s centrally-managed information system; checking of consolidation packages prior to incorporation (compliance s with Group accounting standards and practices and verification of consistency, etc.); the existence of systems for analysing the accounts (reviews s conducted by financial controllers, verification of consolidation transactions, checking that IFRS have been properly applied, analysis of internal transactions, etc.). Reporting and consolidation procedures include the necessary controls to ensure the reliability of financial information. Lastly, in the context of these audits, the audit and risk management department coordinates its work on internal control with the Statutory Auditors.

PREPARATION AND PROCESSING

4.3.4.2

OF ACCOUNTING AND FINANCIAL INFORMATION

The processes relating to the preparation and processing of accounting and financial information are at the heart of the Group’s internal control system. They are designed to ensure stringent financial oversight of the Company’s activities. They encompass all processes involved in producing and reporting accounting and financial information for the parent company and the companies integrated into the consolidated financial statements. The processes are designed to meet the following objectives: the prevention and identification of any accounting or financial fraud s or inconsistencies, as far 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. Oversight of the accounting and financial organisation Hermès has set up an organised and documented system to ensure the consistency of consolidated and reported accounting and financial data. This system is based on a Group Management manual, strict segregation of duties, and strong control by Hermès International over the information produced by the subsidiaries. The internal control process for accounting and financial information involves the following stakeholders: Group Management, which is carried out by the Executive Committee, s led by the Executive Management. As part of the annual and consolidated financial statement review and approval process, the Executive Management receives all information that it deems useful, such as information on the main options applied for the reporting period, accounting estimates and changes in accounting methods. It analyses the subsidiaries’ accounts on a regular basis and meets with their Senior Executives from time to time, particularly during the budget preparation and account closing periods; the Supervisory Board, which exercises ongoing control over the s Company’s management. By consulting Group Management, the Board can verify that oversight and control systems are sufficient to ensure that the financial information published by the Company is reliable; the Executive Vice-President of Governance and Organisational s Development, member of the Executive Committee, who ensures the implementation of appropriate methods (organisation, skilled resources, tools) and oversees the audit and risk management department responsible for the risk management system and internal control coordination; the Executive Vice-President Finance, member of the Executive s Committee, who ensures the implementation of a system for: consolidation of financial information in accordance with IFRS • accounting standards, monitoring and coordination of activity during regular reviews • (year-end and half-year accounts closure, forecast updates and budgets),

INTERNAL AUDIT SYSTEM

4.3.5 Duties

The role of the audit and risk management department is to provide the Hermès Group’s Management with reasonable assurance regarding the level of control over operations in the various entities. It fulfils this role in particular by carrying out audit missions, the purpose of which is to assess: the compliance of activities and operations with the Group’s internal s control rules and procedures, as well as the regulatory provisions in force; the relevance of the risk control processes implemented by s operational staff;

350 2020 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL