LEGRAND / 2018 Registration document

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INTERNAL CONTROL AND RISK MANAGEMENT RISK FACTORS AND CONTROL MECHANISMS IN PLACE

R 3.6.2.7 UNAVAILABILITY OF A PRODUCTION, STORAGE OR LOGISTICS SITE Natural events or other events (such as strikes, fires, health risks, geopolitical events, machinery failures, natural catastrophes etc.) could disrupt or interrupt a site’s activity. The likelihood that such events will occur is increased by the large number of Group sites, but the overall impact on the Group is reduced by the number and geographic spread of industrial sites in all operational activities. In addition, regular analyses of risks and vulnerabilities shown by the Group’s sites are carried out jointly with the Group’s insurer. These analyses cover technical risks (fire, machinery breakdowns, gas leaks, etc.). They allow the Group to assess the potential damage to property and related business interruption. Based on these analyses, local management, in coordination with Group Operations oversee, investments in the prevention, protection, modernization and maintenance of industrial and logistical facilities. Main action plans are followed during the Country Operation Performance Reviews, and prevention good practices are integrated in the Legrand Way. As part of its prevention policy, Legrand conducts joint audits with experts from the Group’s insurance company to evaluate the level of fire protection and take any action deemed necessary. In 2018, 50 such visits were made to the Group’s facilities. Finally, Legrand has taken out a global insurance policy to cover direct accidental damage to property and the potential business interruption resulting from such accidents. R 3.6.2.8 RISKS RELATED TO CLIMATE CHANGE Climate change is creating new risks for companies: damage to physical installations, business interruption, financial risks (linked to the rise in insurance costs, for example) and the impact on populations and therefore on company employees. Faced with these new risk factors, in 2018 the Legrand Group mapped the vulnerability of its sites in terms of the physical consequences of extreme weather events that could affect business continuity (such as flooding, snowfall and storms). The methodology used is based on site scores developed by the Group’s insurers for exposure to natural catastrophe risks. They allow the Group to assess the potential damage to property and related business interruption. The same analyses are also carried out upstream on new building construction projects.

Risk mapping has been carried out for the 124 major sites (of a total of 153 sites) visited regularly by insurers. It should be noted that the sites excluded from the study are mainly unoccupied or dormant sites, minor sites deemed non-critical for the Group or sites acquired during the year or currently being integrated. Regarding the risk of flooding, 82% of the sites visited present no risk or have a risk level deemed non-material. A total of 18%, or 22 sites, present a risk level lower than or equal to 1% (i.e. there is less than a 1% chance that this type of event will occur in any given year). These sites are mainly in France, Italy, India and the United Kingdom. Regarding the risk of storms (including extreme snowfall) and high winds (215-292 km/h), 5% or six sites could potentially be affected by such phenomena. The sites concerned are mostly located in China, the United States and India. The Group’s other sites are not exposed to this type of risk. To limit the impact of this kind of weather phenomenon, organizational measures (evacuation and protection of people and property) and technical resources (flood barriers, measures to secure roofs, repairs to water evacuation systems etc.) have been put in place. These analyses supplement the Group’s site mapping in terms of water stress, which indicates that approximately 80% of the Group’s water consumption takes place at industrial sites located in areas with low or moderate water use (for more information on this topic, please refer to section 4.5.1.2 “Controlling water consumption” in this registration document). Analyses will become progressively more detailed and will be regularly updated. This will enable the Group to target its exposed sites, paving the way for action plans to mitigate the long-term consequences of climate change. Climate change could also have an indirect impact on the profitability of the Group’s product offerings if a carbon emissions tax is introduced. Legrand has anticipated this risk by increasingly including the carbon dioxide price per ton into its operational considerations, notably investment decision processes since early 2016. Finally, there is a reputational risk relating to a loss of trust amongst stakeholders, and in particular investors and customers, if there were no commitment to reducing the Group’s energy footprint or if the Group failed to meet its commitments. Legrand has joined two international initiatives against global warming: the Science Based Targets initiative, which calls on companies to commit to CO 2 emission reduction targets; and the Global Alliance for Energy Productivity, an international alliance that seeks to improve energy efficiency. For more details concerning the impact of the Group activities on greenhouse gas emissions, readers are also invited to refer to section 4.5.1 of this registration document.

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LEGRAND

REGISTRATION DOCUMENT 2018