Hermès // 2021 Universal Registration Document

4

RISK FACTORS AND MANAGEMENT RISK FACTORS

BUSINESS INTERRUPTION ●

4.1.2.2

DESCRIPTION OF THE RISK s

POTENTIAL IMPACTS ON THE GROUP s

Hermès relies on a highly integrated French production method. The vast majority of our objects (78%) are made in France in exclusive in-house workshops (over 58%). The Group’s ability to deal with a major industrial accident at one of its production, distribution or logistics sites (fire, flood), a natural disaster (tsunami, earthquake) or a major health crisis, is a key issue for Hermès.

The occurrence of such events on the production chain would impact the conduct of activities and would have consequences on the Group’s commercial and financial performance.

IMPACT PROBABILITY

RISK MANAGEMENT s The management of industrial risks is carried out by the Group’s industrial affairs department. It is based on EHS networks in both the Group and internally within the métiers , as described in chapter 2 "Corporate social responsibility". The production sites are spread across the country and comply with French regulations, some of the most demanding in the world, thus reducing the risk of a complete shutdown. Hermès implements initiatives designed to protect its manufacturing assets, employees and the environment on all of the House’s production sites. The Group’s industrial affairs department relies on the métiers ’ industrial departments and Site Managers to carry out internal diagnostics. Audits conducted by external specialists enable operational improvement plans to be drawn up. The recommendations resulting from these analyses in the areas of organisation, procedures, training or investment are subject to careful follow-up. Safety-related expenditures and investments are considered to be a priority when making budget choices. In particular, in the current health context, adjustments have been made to the various sites to allow the activity to continue while respecting the health recommendations. Two studies were carried out in collaboration with the Group’s insurer in order to quantify the financial exposures related to production and storage sites as well as strategic suppliers for the Leather and Silk métiers . These analyses identified the sites, subcontractors and critical suppliers on which the Group should target its actions in order to ensure activity continuity. The Leather study was updated in 2020 and the Silk update was started in 2021. During its audits, the audit and risk management department ensures that activity continuity plans are formalised and tested on the Group’s various sites and, where appropriate, issues recommendations. At the end of 2021, a centralised review of plans for the entire Group was initiated. In addition, the Group safety department, in collaboration with internal experts, coordinates regular site visits. Dedicated action plans are implemented and monitored operationally by the sites concerned.

O Strategy & operations

Industry O

CSR O

O Regulatory compliance

O Finance

336 2021 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL