Hermès // 2022 UNIVERSAL REGISTRATION DOCUMENT

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RISK FACTORS AND MANAGEMENT RISK FACTORS

FINANCIAL RISKS

4.1.5

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 position, it is not exposed to liquidity risk and applies a conservative policy in managing counterparty risks.

FRAUD ӳ

4.1.5.1

DESCRIPTION OF THE RISK ◆

POTENTIAL IMPACTS ON THE GROUP ◆

Any case of fraud could cause financial losses to the Group and tarnish its reputation.

The Group’s exposure to the risk of fraud is due in particular to its growing visibility in many countries and its increasing digital presence. The inventiveness and adaptability of external fraud attempts on defence systems seen on the market also represent threats.

IMPACT PROBABILITÉ

RISK MANAGEMENT ◆

The management of payment transactions is centralised by the Group’s treasury department and governed by precise validation and control rules. The Middle & Back‑Office department ensures administrative management and operational control, notably via the use of integrated cash flow software. The Treasury Security Committee regularly checks that these procedures have been applied and that any risks identified have been addressed. The audit and risk management department oversees proper compliance with risk monitoring and management procedures. As part of the coordination of internal control, it regularly creates awareness among the network of internal control officers about the risk of fraud and restates the specific fraud prevention procedures, in particular as regards the purchase and payment process. At the same time, external audits are regularly carried out to identify and correct any vulnerabilities. Audits in subsidiaries to verify the proper application of procedures complement this system. At exclusive store level, a specific fraud prevention tool, developed on a data mining platform, was rolled out in 2021. It is regularly updated and enhanced. The Group’s risk mapping, as well as the risk mapping applied to the métiers and the main subsidiaries, address this risk and the corresponding action plans. Accordingly, awareness‑raising campaigns in the functions most at risk of fraud are conducted on a regular basis. Awareness‑raising, identified as an effective fraud prevention tool, is rolled out and adapted to the types of fraud (risk of system intrusion, “CEO fraud”, etc.). In addition, an ad hoc security system has been put in place and is monitored by the Group safety department. Furthermore, a corruption risk map was drawn up with the assistance of a specialist external consultant and in collaboration with the Director of Legal Compliance (see chapter 2 “Corporate social responsibility and non‑financial performance”, §2.8.2.2.1). This was updated in 2020. The system put in place by the Group to protect itself against IT intrusion is the subject of a dedicated risk mapping (§4.1.1.3).

● Strategy and operations ● Industry

● CSR

● Regulatory compliance

● Finance

2022 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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