Hermès // 2022 UNIVERSAL REGISTRATION DOCUMENT

RISK FACTORS AND MANAGEMENT RISK FACTORS

EXCHANGE RATES ӳ

4.1.5.2

DESCRIPTION OF THE RISK ◆

POTENTIAL IMPACTS ON THE GROUP ◆

Financial losses.

The Group is naturally exposed to foreign exchange risk because the bulk of its production is located in the eurozone, but the majority of its sales revenue is received in currencies other than the euro (American dollars, Japanese yen and other Asian currencies, etc.). As at 31December 2022, 80% of the Group’s sales were made in a currency other than the euro.

IMPACT PROBABILITÉ

RISK MANAGEMENT ◆

This exposure is hedged in order to minimise and anticipate the impact of currency fluctuations on the Group’s profits. The Group’s foreign exchange risk exposure management policy is based on the following principles:

The Executive Committee approved these management rules, which were then endorsed by the Supervisory Board. The Middle & Back‑Office department ensures administrative management and operational control, notably via the use of integrated cash flow software. In addition, Hermès International’s audit and risk management department ascertains compliance with management procedures and the control of risks. Group Finance Management validates management decisions within these rules. The Group’s foreign exchange risk is hedged annually by Hermès International in accordance with the policy described above. It is based on highly probable future cash flows derived from budget forecasts. In practical terms, as at 31December, the hedging of internal transactions in currencies for the following year is close to 100%. As such, the Group uses purchases and sales of put and call options as well as currency swaps and forward currency agreements. Quantitative information on foreign exchange risk impacts is provided in chapter 5 "Consolidated financial statements”, §10.2 of the consolidated financial statements. The treasury department constantly monitors changes in legal regulations with regard to derivative transactions to ensure that the Group remains compliant. Furthermore, the finance department adjusts its procedures and tools on an ongoing basis to accommodate changes in its environment. Thanks to the exchange rate hedging policy, the impacts are pre‑empted. The price increases determined by region offset all or part of any losses. these hedges are provided through firm foreign exchange transactions and/or optional transactions eligible for hedge accounting; • other non‑operating transactions are hedged against foreign exchange risk as soon as their commitment is firm and final. They include financial risks arising from intragroup loans and dividends in foreign currencies. • distribution subsidiaries are invoiced in their currency by production subsidiaries. The latter apply an annual exchange rate to the scales established in euros. So, the distribution subsidiaries concentrate most of the foreign exchange risk; • the Group’s foreign exchange risk is systematically hedged by Hermès International on an annual basis. This basis is calculated using future internal cash flows from operations between Group companies; • no speculative transactions in the economic meaning of the term are authorised; •

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● Strategy and operations ● Industry

● CSR

● Regulatory compliance

● Finance

2022 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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