L'Oréal - 2018 Registration Document

Corporate Governance RISK FACTORS AND CONTROL ENVIRONMENT

Customer risk 2.8.5.3.5.

CUSTOMER RISK Risk identification

Risk management

Customer risk may result from a failure to collect receivables due to cash problems encountered by customers or to customers no longer being in business.

This risk is limited as, subject to exceptions, it is covered locally by a credit insurance policy. The risk associated with credit insurance is mentioned in section 2.8.5.3.8. “Insurance” below. Due to the large number and variety of distribution channels worldwide, the likelihood of a significant impact on the Group as a whole remains limited. The 10 largest distributor customers represent 22% of the Group’s sales. The amount considered at risk of non-collection and set aside as a provision is set out in note 3.3.2. “Trade accounts receivable” of the Consolidated Financial Statements. This amount does not exceed 2% of gross accounts receivable.

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Liquidity risk 2.8.5.3.6.

LIQUIDITY RISK Risk identification

Risk management

The Group’s Corporate Finance Department centralises all of the subsidiaries’ financing needs and negotiations with financial institutions so as to have better control over borrowing conditions. Any transactions that may be carried out directly by subsidiaries are closely supervised. To this effect, the Group has unused confirmed credit lines from several first-rate banks totalling €3,644 million, including 450 million in USD facilities (€394 million). None of the lines of credit have a maturity under one year and all of them have maturities staggered from 2019 to 2022. (see note 9.1.10. “Confirmed credit lines” of the Consolidated Financial Statements, chapter 4). These lines were not subject to any covenants. The Group also regularly uses the financial markets through the use of short-term marketable instruments in France and commercial paper in the United States. None of the Group’s borrowings or debt contains an early repayment clause linked to financial ratios (see note 9.1.1. “Analysis of debt by type”, 9.1.3. “Analysis of debt by maturity”, and note 10.6. “Liquidity risk” of the Consolidated Financial Statements, chapter 4). When the Group makes financial investments, in the form of either bank deposits or marketable securities, it gives priority to short-term transferable instruments from first-rate financial institutions. The L’Oréal Group benefits from the following short-term credit ratings: A-1+, confirmed in September 2018 by Standard & Poor’s; s Prime 1, confirmed in April 2018 by Moody’s; s F1+, confirmed in September 2018 by FitchRatings. s These ratings are unchanged compared to those assigned previously.

The L’Oréal Group’s liquidity risk is managed with the primary aim of ensuring continued financing and optimising the financial cost of debt.

REGISTRATION DOCUMENT / L'ORÉAL 2018

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