PERNOD-RICARD - URD 2020-21

____ 4. RISK MANAGEMENT RISK FACTORS

Financial risks IV. The Group’s main financial risks are market, credit and liquidity risks. They are subject to risk management policies and procedures put in place to measure and manage them and reduce their occurrence or impact. In an economic context that remains uncertain and in order to manage the liquidity risk that may result from the repayment of financial liabilities at their contractual maturity, Pernod Ricard has taken precautionary measures to ensure sufficient liquidity to meet its needs and continues to diversify its sources of financing, thereby limiting dependence on various lenders. Thus, the Group anticipated the refinancing of a portion of its Bonds in US dollars in October 2020 (issuance and early redemption of existing Bonds in US dollars via the exercise of the

make-whole option provided for in the contract, for an equivalent amount). This transaction made it possible to substantially extend the average maturity of the Group’s bond debt. As of 30 June 2021, the Group’s cash position stood at €2.1 billion, plus €3.4 billion in undrawn secured credit lines, including a €600 million revolving credit line set up in March 2020. The Credit Agreements also set out obligations, including a commitment to provide lenders with adequate information, compliance with a solvency ratio at each half-year end (which must be less than or equal to 5.25) and compliance with certain commitments customary in this type of credit agreement (including the maintenance of the credit’s pari passu ranking). Fluctuations of this nature may therefore have an impact on Pernod Ricard’s results and shareholders’ equity. They include: conversion risk for the financial statements of consolidated affiliates with a functional currency other than the euro; and operational risks on operating cash flows not denominated in the entities’ functional currency. Moreover, fluctuations in currencies against the euro (notably the US dollar) may impact the nominal amount of these debts and the financial expense reported in euros in the consolidated financial statements, and this could affect the Group’s reported results. POTENTIAL IMPACTS ON THE GROUP

1. Foreign exchange risk (1)

RISK IDENTIFICATION AND DESCRIPTION

Due to its international footprint, the Group is naturally exposed to fluctuations in foreign currencies (excluding the euro, its functional and reporting currency) in which its operations are carried out (transaction and translation risks) and in which its assets and liabilities are denominated.

RISK CONTROL ANDMITIGATION As a rule, it is Group policy to invoice end customers in the functional currency of the distributing entity. The resulting net foreign exchange exposures are hedged by the use of forward transactions. Residual risk may be partially hedged by the use of financial derivatives (forward purchases, forward sales or options) intended to hedge highly probable receivables or payables or to secure the receipt of dividends. For asset risk, financing foreign currency-denominated assets acquired by the Group with debt in the same currency provides natural hedging.

2. Interest rates risk (1)

RISK IDENTIFICATION AND DESCRIPTION

POTENTIAL IMPACTS ON THE GROUP

Pernod Ricard is exposed to changes in interest rates on its financial liabilities and its liquid assets; such changes may have a positive or negative effect on its financial expense. As of 30 June 2021, the Group’s debt consisted of floating-rate debt (8%) and fixed-rate debt (92%), to which should be added a hedging portfolio intended to limit the negative effects of interest rate fluctuations.

The Group is naturally affected by changes in interest rates in its functional currency and, more marginally, by changes in the interest rates of other currencies contributing to its consolidated Net debt. A rise or fall of 50 basis points in interest rates (euro or US dollar) would result in an increase or decrease of €5 million in the cost of net financial debt.

RISK CONTROL ANDMITIGATION As part of its financial policy, Pernod Ricard seeks to limit interest rate risk by focusing on fixed-rate funding for a significant portion of its financial debt.

Note 4.9 to the consolidated financial statements. (1)

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PERNOD RICARD UNIVERSAL REGISTRATION DOCUMENT 2020-2021