LEGRAND / 2018 Registration document

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

R 3.6.3.6 ENVIRONMENTAL IMPACT The main industrial processes that take place on Legrand’s sites focus on the molding of plastic components, the production of metal parts and the assembly of plastic, metal and electronic components, as well as painting or surface treatment on a less frequent basis. These activities may have an impact on the environment, even if this impact is, by nature, limited. Accordingly, some of Legrand’s sites are, like those of similar companies, subject to obtaining permits and authorizations and to extensive and increasingly stringent environmental regulations regarding matters such as emissions into the atmosphere and water, use of substances, energy and water consumption, waste processing methods and remedial measures to deal with any potential environmental contamination. If Legrand failed to comply with the relevant regulations, the authorities could suspend Legrand’s operations and/or may not renew the permits or authorizations it requires to conduct its business. Moreover, Legrand may be required to pay potentially significant fines or damages as a result of past, present or future violations of environmental regulations, even if these violations occurred before Legrand acquired the relevant companies or business lines. The courts and regulatory authorities, or third parties, could also oblige or seek to oblige Legrand to undertake investigations and/ or implement remedial measures concerning current or historic contamination of operational or former facilities or to install off- site waste treatment facilities. Any of these actions could harm the Group’s reputation and adversely affect its business, results and financial position.

Legrand has designed and developed an environmental risk prevention and measurement policy. This policy includes regulatory monitoring supported by a network of environmental correspondents appointed at each Group industrial site, who liaise with their equivalent departments in the SBUs and with Group’s headquarters. Concerning the Group’s operational activities, Legrand has rolled out a policy to identify environmental risks (“Material Environmental Aspects”) to support its sites’ ISO 14001 certification efforts. At the end of 2018, 90% of the Group’s industrial and logistics sites that had been integrated into the Group for more than five years were ISO 14001-certified. Warning systems are in place to quickly inform the Group about actual or suspected pollution. Provisions for environmental risks are set aside when environmental assessments are available or remedial works are probable and their cost can be reasonably estimated. These provisions amounted to €7.4 million at December 31, 2018. Taken individually, none of those provisions were material. To limit the environmental risks related to products, the Group has committed to complying with the restrictions on the substances identified in the RoHS Directive for all of its products sold worldwide, over and above the regulatory requirements of the RoHS Directive and the REACH regulation in Europe. Naturally, Legrand products comply with environmental regulations regarding energy efficiency, for example.

3.6.4 – Financial risks

Counterparty, liquidity, currency and interest-rate risk and the corresponding financial instruments are also described in note 5.1.2 on the management of financial risk, found in Chapter 8. R 3.6.4.1 FAILURE TO ACHIEVE EXPECTED FINANCIAL PERFORMANCE If one or more risks, including those described in this chapter, were to materialize, Legrand could be unable to achieve the targets it has set, either annually or in the medium term, or to meet market expectations in terms of financial performance. This could result in a substantial decline in its share price or the value of its listed bonds.

To limit that risk and give it the means to respond as quickly as possible, Legrand monitors its performance very closely using the following tools: W annual budgets for each Group entity, including a basic scenario, a scenario involving less favorable market conditions including detailed adjustment plans, and a scenario involving more favorable market conditions; W detailed monthly performance analysis for each Group country and for the consolidated Group; and W quarterly performance reviews for each of the Group’s main countries; W accountable managers whose remuneration is linked to the achievement of annual targets set out in a Financial Performance Contract.

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LEGRAND

REGISTRATION DOCUMENT 2018