Hermès // 2022 UNIVERSAL REGISTRATION DOCUMENT

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RISK FACTORS AND MANAGEMENT RISK FACTORS

BANK COUNTERPARTY ӳ

4.1.5.3

DESCRIPTION OF THE RISK ◆

POTENTIAL IMPACTS ON THE GROUP ◆

As the Group has a positive cash position and because of its other banking transactions (exchange rate hedging), the Group is exposed to counterparty risk that is mainly banking‑related and is appropriately monitored.

Financial losses.

IMPACT PROBABILITÉ

RISK MANAGEMENT ◆

The Group only deals with leading banks and financial institutions that have signed FBF and ISDA agreements relating to transactions on forward financial instruments. In addition, Hermès International’s treasury department continuously monitors counterparty risks on financial transactions. Finally, the Group breaks down investment transactions, foreign exchange risk hedging transactions and deposits transactions in the selected banks within defined limits of amount and maturity. Moreover, the impact of the credit risk as recommended by IFRS13 in the fair value of derivatives is close to zero for the Group, given that all of the derivatives have a maturity of less than 12 months. The Group follows a cautious investment policy, which aims to avoid any risk of capital loss and prioritise liquidity, thus enabling independent and responsive strategic developments. Available cash is mainly invested in term deposits and in deposit certificates issued by top‑rated banks, as well as in money‑market mutual funds offered by leading financial institutions, with low sensitivity and short terms. Quantitative information on interest rate 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 investment transactions to ensure that the Group remains compliant. Furthermore, the finance department adjusts its procedures and tools on an ongoing basis to adapt to changes in its environment.

CHANGES IN, COMPLEXITY AND INTERPRETATION OF TAX REGULATIONS ӳ

4.1.5.4

DESCRIPTION OF THE RISK ◆

POTENTIAL IMPACTS ON THE GROUP ◆

The Group is exposed to financial risks related to changes in tax regulations or their interpretation in the countries where it operates.

Any change in tax regulations involving and increasing taxes and duties, mainly income taxes, custom duties, withholding taxes, particularly concerning goods and financial flows (interests, dividends), could penalise the Group’s results.

IMPACT PROBABILITÉ

RISK MANAGEMENT ◆

The Group provides regulatory oversight and defines its tax policy by relying on a team of tax experts, assisted by external advisers if necessary. The Group is committed to respecting all applicable laws and regulations in each of the countries where it operates. It relies on transparent and simple organisation. The Group’s tax policy is not based on any tax optimisation or evasion scheme and complies with the principles laid down by the OECD. In the case of a dispute or differences in interpretation, the Group may have to challenge reassessments with the tax authorities and to seek redress using the means available to it for its defence.

● Strategy and operations ● Industry

● CSR

● Regulatory compliance

● Finance

2022 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

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