PERNOD-RICARD - URD 2020-21

____ 4. RISK MANAGEMENT RISK FACTORS

7. Supply chain disruptions

RISK IDENTIFICATION AND DESCRIPTION

POTENTIAL IMPACTS ON THE GROUP

While the global crisis linked to the Covid-19 pandemic has shown the resilience of the Group Pernod Ricard’s supply chain, it has also shown that large-scale, unpredictable events could occur and render access to markets more complex. Other factors also remain relevant, such as the failure of a key supplier, the unavailability of certain raw materials (weather conditions, in particular) or the closure or impossibility of access to certain routes, whether sea or land. By way of illustration, a trend towards the concentration of suppliers of raw materials and packaging has been observed for a number of years. Today, many of the Group’s affiliates work with the same suppliers, which creates risk-charged interdependence should one of them fail ( e.g. in the event of a major accident at one of their production sites).

A breakdown in the supply chain could occur due to the unavailability of certain raw materials or packaging materials, causing production of some of the Group’s products to be shut down. Furthermore, the unavailability of certain products on the shelves, for one or more of the reasons mentioned here, could result in penalties invoiced by the Group’s customers for non-compliance with the commercial terms and conditions and service rates agreed between the parties. Lastly, an unexpected rise in the cost of raw materials or packaging materials could significantly increase the Group’s operating costs. As it is not certain that this increase can be offset by higher prices, the Group’s results could be affected.

RISK CONTROL ANDMITIGATION As part of the business continuity measures put in place for the Group’s strategic brands, affiliates systematically identify supply alternatives whenever there is a risk of a single supplier. These alternatives are also tested to ensure the viability of these choices. In addition, to mitigate other scenarios taken into account in these business continuity plans (such as the loss of a storage site or transport difficulties), emergency stocks are planned and taken into account on a permanent basis in the supply and production decisions of Brand Companies and Market Companies. Lastly, the reinforcement of the “S&OP” process, supported by the rollout of IT tools, gives better visibility concerning future demand and associated supply plans. In this context, more detailed planning of needs - at the level of the Brand Companies in particular - makes it possible to secure supply volumes from key suppliers and facilitate allocation decisions for the various markets if necessary.

8. S&R challenges

RISK IDENTIFICATION AND DESCRIPTION

POTENTIAL IMPACTS ON THE GROUP

Failure to meet these objectives or the occurrence of an event in conflict with our commitments (such as an industrial accident) would damage the credibility and reputation that the Group has built up over recent years with its stakeholders, in addition to the direct consequences.

Pernod Ricard places the responsibility and sustainability of its activities at the heart of its strategy and decisions. In this context, an ambitious roadmap for 2030, called Good Times From a Good Place, was rolled out in 2019. Structured around natural resources and key stakeholders for the Group, this strategy has four pillars (“Nurturing terroir”, “Valuing People”, “Acting Circular” and “Responsible Hosting”) for each of which quantitative and qualitative objectives have been defined. All of these commitments represent real challenges that the Group is intent upon tackling, in line with its historical approach and the expectations of its stakeholders, in particular consumers, employees and shareholders.

RISK CONTROL ANDMITIGATION The Group has built a solid governance around the issues of responsibility and sustainability. At the level of the Board of Directors, a CSR Committee ensures that Pernod Ricard’s roadmap and commitments are monitored. In addition, at operational level, a steering committee meets four times a year to ensure that the resources are put in place to achieve the objectives. Pernod Ricard is also setting up key partnerships to reinforce the implementation of the strategy. Finally, reporting and monitoring tools covering all indicators in all Group affiliates make it possible to verify the Group’s progress and the alignment of all functions involved in achieving these goals.

157

PERNOD RICARD UNIVERSAL REGISTRATION DOCUMENT 2020-2021