PERNOD-RICARD - URD 2021-22 EN

4. Risk management Risk factors

9. Fraud

RISK IDENTIFICATION AND DESCRIPTION

POTENTIAL IMPACTS ON THE GROUP

Pernod Ricard is exposed to the risk of fraud, in particular due to its presence in many countries, the acceleration of its digitisation and the development of potential threats.

Whether fraud is internal or external, any type of occurrence could lead to financial losses (including legal costs to recover defrauded sums or products), leakage of sensitive information or theft of major physical assets. It could also have a significant impact on the Group’s reputation.

RISK CONTROL AND MITIGATION

To mitigate this risk, the Pernod Ricard Group has implemented training measures ( e.g. the online course on internal control) to raise fraud awareness among Pernod Ricard employees. In addition, a strong internal control framework – relying on the Group internal control principles and related tools – has been set up across the Group to limit the risk of occurrence. Further, the Group conducts internal and external audits each year to ensure the effectiveness of measures in place.

II.

Industrial and environmental risks

1. Loss of a major industrial site/strategic inventory

RISK IDENTIFICATION AND DESCRIPTION

POTENTIAL IMPACTS ON THE GROUP

The loss of a major industrial site or strategic inventory is considered a major risk for Pernod Ricard. The materialisation of this risk could result in a significant operating loss and as such a sharp drop or prolonged interruption in the supply of certain products, thereby preventing the Group from meeting consumer demand. Moreover, an incident at one of the sites, whether accidental or the result of a malicious act, could jeopardise the safety of Group employees or could cause environmental damage.

Today, the main identified causes that could result in the loss of a major industrial site or strategic inventory are: a fire and/or explosion related to the manufacture and handling of flammable products ( e.g. alcohol); a natural catastrophe such as an earthquake, hurricane or flood; and a malicious act. Several Group sites are located in seismic zones, particularly in New Zealand, Armenia, California and Mexico. Certain sites, including the San José plant in Cuba, are exposed to risk of cyclones. Lastly, the Group has significant stock of maturing products, such as Scotch whisky, Irish whiskey, cognac, rum, brandy and wines, which are highly flammable.

RISK CONTROL AND MITIGATION

To manage this risk, an Operations Risk Manager reporting to the Operations Department is responsible for coordinating the actions of affiliates in the implementation of preventive measures (design and maintenance of facilities, training, operating procedures, etc.) and physical protection mechanisms (automatic extinguishing, retention basins, emergency procedures, etc.). In cooperation with the insurer, more than 40 industrial sites are reviewed each year, resulting in an appraisal of the quality of risk, and as such, recommendations for improvement for each. In addition, a Group monitoring programme for business continuity and management systems is in place. Strategic affiliates have identified the various scenarios that could affect their operations and have drawn up business continuity plans including the implementation of emergency solutions and access to alternative means of production in the event of the loss of a site.

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Pernod Ricard Universal Registration Document 2021-2022