HERMES_REGISTRATION_DOCUMENT_2017

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OVERVIEW OF THE GROUP

RISK FACTORS

LEGAL AND REGULATORY RISKS

Finally, the Group ensures that its rights are respected and pursues an active anti-counterfeiting policy involving both preventive measures (training and lobbying) and coercive measures (administrative, civil and criminal proceedings) across the world and particularly on the Internet. Thesemeasures are initiated by the legal department with the support of external advisers and in collaboration with the competent local authori- ties as regards intellectual property and the fight against counterfeiting. A teamof lawyers specifically dedicated to this issue is responsible every day primarily for finding and discontinuing disputed advertisements published on online sales platforms, and to identifying and closing down online sites offering counterfeit products for sale. Hermès is also active on social networks. Active monitoring is carried out in order to remove false profiles and to withdraw all content that breaches the rights of Hermès Group. In this context, Hermès carries out investigations which are often very difficult andwhose purpose is to enable the counterfeiters responsible for the sites to be identified and to take action against them. These actions enable several hundreds of thousands of counterfeit pro- ducts to be seized and destroyed every year, and the source of these products to be identified, the Group’s rights to be recognised, and the payment of damages to redress the loss suffered. Description of the risk The Group has put in place an organisational structure which allows financial risks related to its business to be managed centrally. As the Group has a positive cash flow, it is not exposed to liquidity risk and applies a conservative policy in managing interest rate risks. Risk management Treasury and currency management is centralised by the Group’s trea- sury management department and adheres to strict management and monitoring rules. Administrative management and operational control are ensured by the middle & back office department, notably via the use of integrated cash flow software. Furthermore, the audit and risk management department (A&RMD) oversees proper compliance with risk monitoring and management procedures. On a monthly basis, the Treasury Security Committee ascertains that these procedures have been followed and that any risks identified have been addressed. 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. In addition, counterparty risks on financial transactions are monitored on an ongoing basis by Hermès International’s treasury management department. Most available cash is invested for the short term, mainly in money-market mutual funds offered by leading financial institutions, in term deposits and in deposit certificates issued by top-rated banks, with very low sensitivity. 1.8.3 FINANCIAL RISKS 1.8.3.1 Conservative cash management

1.8.2

Compliance with applicable laws and regulations in all areas

1.8.2.1

Description of the risk The Group keeps abreast of changes in legislation and case law in all relevant areas to ensure that it complieswithFrenchand foreign laws and regulations. Thismonitoring is carried out by in-house and external firms. Risk management Internally, given the increasing complexity of each legal matter, the legal department is organised into skill divisions with specialists from the various main legal fields: intellectual property law, company law and stock market law, property law, business law (contracts of all kinds, com- petition, distribution, consumer). Employment and tax matters are res- pectively handled by the Group’s human resources and finance depart- ments, which work in conjunction with the legal department. A compliance committee was created in 2017 (see 1.8.1.1, page 36). Externally, in each region where the Group operates, Hermès is advised by leading local independent law firms, renowned and specialised in each of the numerous areas covered. The Group continues to be invol- ved in ongoing litigation, but there are no pending settlements that are expected to have an impact on its business or on its financial results. The Company is not aware of any other pending or potential governmen- tal, legal or arbitration proceedings that may have, or that over the last twelvemonths have had, a significant impact on its financial condition or profitability and/or on the financial position or profitability of the Group. Description of the risk The Group places great importance on the protection and defence of its intellectual property rights. It is very active in the area of combating counterfeiting. All of the Group’s business activities are affected by the scourge and, most particularly, the Leather Goods sector. Risk management The Group owns a particularly large number of brands and domain names which is regularly growing to include new classes of products and services, for example, and new geographical areas. For this reason a specific team within the legal department is dedicated to these issues. TheGroup also ensures that all its newand existing crea- tions are properly protected, with numerous design patents filed both in France and elsewhere. 1.8.2.2 Protecting and defending intellectual property rights and combating counterfeiting

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2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL