Société Générale / Risk Report - Pillar III

3 RISKMANAGEMENT ORGANISATION RISK APPETITE – GENERAL FRAMEWORK

RISK APPETITE – GENERAL FRAMEWORK 3.4

Risk appetite is determined at Group level and declined in the businesses and subsidiaries. It is followed up according to the principles set out in the Risk Appetite Framework, which are summarised below. Governance Each year, the Board of Directors approves the Group’s Risk Appetite Statement proposed by the Executive Management and the Group Risk Appetite Framework which oversees and implements risk appetite. It ensures that risk appetite is relevant to the Group’s strategic and financial objectives and its vision of the risks presented by the macroeconomic and financial environment. The Board of Directors is also informed of the appropriate implementation of the risk appetite through an annual assesment. The Risk Department and the Finance Department determines the risk appetite and, in conjunction with the Compliance Department, conducts second-level monitoring and controls of its implementation. Determining and allocating risk appetite The following procedures result from the process of determining and allocating risk appetite: the identification and assessement of all significant risks to which p the Group is exposed using prospective tools (stress tests); a forecast of the Group’s profitability and solvency in a central p scenario and in a stressed scenario over a horizon of at least three years which is used to define the strategic and financial plan; an allocation of the risk appetite within the Group, up to the p relevant level, taking into account the risk/profitability profile of the businesses and their development prospects; a formalisation at Group, Business Unit and main subsidiary level. p The Group’s risk appetite is formalised in the Risk Appetite Statement which sets out: the Group’s strategic profile; p its profitability and financial strength profile; p the qualitative and quantitative frameworks for the Group's main p risks, respectively through risk strategies and indicators.

Every year, ahead of the budgeting procedure and after an independent review by the Risk Department, the Finance Department submits Group level targets to General Management sitting at the Finance Committee. The targets are supplemented by alert thresholds and crisis levels using a traffic light approach. These frameworks are subsequently submitted for approval to the Board of Directors. These financial targets enable the Group to: comply, using a sufficient safety buffer, with the regulatory p obligations to which it is subject (in particular the minimum regulatory solvency, leverage and liquidity ratios), by anticipating the introduction of new regulations as best as possible; ensure, using a safety buffer, sufficient resistance to stress scenarios p (stress normalised by regulators or stress defined according to a process internal to the Group). The main risks to which the Group is exposed are identified and subject to risk targets/limits that include alert thresholds and potentially a crisis level. Allocation of risk appetite within the organisation The allocation of risk appetite within the organisation relies on the strategic and financial plan, and on risk management systems. The Finance Department submits the financial targets defined at Group level to General Management. Targets are broken down into budget allocation targets at business level as part of the budget, and the strategic and financial plan. At the end of the budget planning process, General Management and the Finance Department submit to the Board of Directors the budget plan in a central scenario and in a stressed scenario, and they verify that the initial financial targets are being respected, if not the Board of Directors may either approve new frameworks or request amendments. Allocation of risk appetite is based on an understanding of the businesses' needs and development. The allocation takes into account the profitability and financial strength objectives of the Business Unit and/or the entity.

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PILLAR 3 - 2020 | SOCIETE GENERALE GROUP |