L'Oréal - 2018 Registration Document

2 Corporate Governance

RISK FACTORS AND CONTROL ENVIRONMENT

The Group’s Ethical Principles Ethical Principles

The choice of how to handle a risk is made by making an informed choice between the risks to be controlled, the opportunities to be seized and the cost of the risk treatment measures, taking into account their effects on the occurrence and/or the consequences of the risk. of the Internal Control system With the aim of continually improving the system of Internal Control, the Group continued with its efforts in 2018 by taking the following actions: The corpus of standards and procedures was bolstered with, in particular: new summary operating guides put in place to remind s employees of the Group’s principles and to facilitate the sharing of best practices (customs, fiscal charter, supply chain standard, payroll management, retail, e-commerce, digital and the protection of personal data); an updated version of the Group’s digital standard (see s “Communication of information inside the Group”); revamping of the programme to raise awareness of the risks s of fraud. The deployment of online training (prevention of corruption, data security, competition, personal data protection) is ongoing. The network of Internal Control managers continued to be built up worldwide through: specific training courses; s a special-purpose social network which encourages and s facilitates the sharing of best practices. Communication within the Group on the main priorities of the Internal Control is promoted by the “Internal Control Awards”, which rewards the best global initiatives, and through the Risk Management and Compliance Department’s intranet which makes it possible to communicate all over the world on Internal Control initiatives, tools and events. COMPONENTS OF THE INTERNAL 2.8.2. CONTROL AND RISK MANAGEMENT SYSTEM Organisation and environment 2.8.2.1. The control environment, which is critical to the Internal Control system, good risk management and the application of procedures, is based on people, behaviour and the organisational structure. In L’Oréal, it forms part of a culture of rigour and commitment communicated by senior management and is also in line with the Group’s strategic choices. Continuous improvement 2.8.1.3.

L’Oréal has built up its business on the basis of strong Ethical Principles that guide its development and contribute to establishing its reputation: Integrity, Respect, Courage and Transparency. L’Oréal’s commitment to acting ethically and responsibly is summarised in a document called “The L’Oréal Spirit” accessible to everyone. L’Oréal’s Code of Ethics is available in 45 languages and in Braille in English and French. It is distributed to all employees around the world. It enables employees to understand how these Ethical Principles need to be reflected in their behaviour and actions by providing simple rules and a description of concrete situations they may encounter. The Code of Ethics applies to all employees, corporate officers and members of the Executive and Management Committees of the Group and its subsidiaries worldwide. Since 2010, 13 supplements to the Code of Ethics have covered certain aspects of the Code in more details. The Senior Vice-President and Chief Ethics Officer Reports directly to the Chairman and Chief Executive Officer on a regular basis. His mission is to: ensure the promotion and integration of best practices s within the Group, providing guidance in ethical decision-making; oversee employee training; s oversee the handling of concerns and directly manage s those related to senior management positions; measure and assess the Company’s ethical performance. s He reports to the Board of Directors and the Audit Committee on a regular basis. He has a dedicated budget and team, access to all information and documents concerning the Group’s activities and recourse to all the Group’s teams and resources to carry out his work. The Senior Vice-President and Chief Ethics Officer, reporting to the Chief Executive Officer, is in charge of overseeing respect for human rights within the Group (see section 3.3.3.) and is the L’Oréal representative for the United Nations Global Compact and NGOs linked to his business activity. Implementation of L’Oréal’s ethics programme Country Managers (or for Corporate or Zone staff, the members of the Group’s Executive Committee to whom they report) are responsible for ensuring the respect of the Code of Ethics in their country. The Group’s Senior Vice-President and Chief Ethics Officer meets systematically with each new Country Manager and with the Group’s main senior managers to inform them of their role. The senior managers also have a tool available to help them develop their ethics leadership.

REGISTRATION DOCUMENT / L'ORÉAL 2018

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