PERNOD RICARD - Universal Registration Document 2019-2020

4. RISK MANAGEMENT Risk factors

Legal and regulatory risks III. Regulatory changes 1. a. Business ethics  (1)

RISK IDENTIFICATION AND DESCRIPTION

POTENTIAL IMPACTS ON THE GROUP

Pernod Ricard is a decentralised company present in 73 countries where anti-bribery laws apply with potential extraterritorial effect. Examples include the US Foreign Corrupt Practices Act, the UK Bribery Act or France's Sapin II law. In particular, recent regulations concerning the fight against corruption and the promotion of business ethics expose Pernod Ricard to sanctions and reputational risk should it fail to comply. In this context, Pernod Ricard is required to consider and strongly monitor the risk of corruption around the world.

Company employees interact, even to a marginal extent, with political and administrative officials. The nature of Pernod Ricard’s activity (production of wines & spirits enjoyed during a meal or in a bar), for which the motto is “Créateurs de convivialité”, means that inappropriate invitations could be issued to people in a position of public authority as part of a lobbying effort. Such acts, even in the absence of deliberate intention to obtain an undue advantage, are severely punished by the anti-corruption laws of three of the Group’s main markets, which impose heavy pecuniary sanctions for the Company, as well as penal penalties for the people committing them. Reputational damage resulting from an official conviction or breach of the rules could damage the Company’s overall credibility, and an illicit or reprehensible act, even on a single occasion, could affect all Group employees seeking to deliver a message to public authorities. This could in turn limit the Company’s ability to legally influence laws that are harmful to its business. It could also result in regulatory developments harming the Company’s business (tax increases, marketing restrictions, etc.). As a result, these regulations could together result in a significant increase in financial expense or a reduction in the Group’s activities.

RISK CONTROL AND MITIGATION Pernod Ricard has established an anti-bribery risk mapping tool in order to identify and manage risks inherent to the Group’s activities and specific to production, distribution and cross-functional risks. Pernod Ricard is also committed to a zero-tolerance policy with clear communication from Management, specific rules for employees and stakeholders, and special user-friendly digital tools to support its compliance efforts (for example, “Speak Up”, a global whistleblowing hotline; “Gifted!”, an app which can be used to declare and authorise gifts and hospitality; an e-learning platform [MOOC] providing educational videos and quizzes to enable employees to identify and manage bribery risks). Furthermore, the Group’s lobbying policy is guided by the various professional or institutional codes, and a training course on lobbying, part of which focuses on ethical issues, is open to all employees. Part of the course is delivered by Transparency International, of which Pernod Ricard has been a member since early 2013. In France, Pernod Ricard files a disclosure statement with the HATVP, the High Authority for Transparency in Public Life (2) and is a member of Transparency International’s Forum des entreprises engagés (3) . The Group is also a joint signatory of a best practice guide on parliamentary lobbying expenditure published by Transparency International.

(1) Note that this risk is also covered in Section 3.4 of the Extra-Financial Reporting. (2) https://www.hatvp.fr/fiche-organisation/?organisation=582041943 (3) https://transparency-france.org/entreprise/forum-des-entreprises-engagees-2

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