TECHNICOLOR_REGISTRATION_DOCUMENT_2017

- 3 RISKS, LITIGATION AND CONTROLS Risk factors

The DVD Services Division has signed multi-year contracts with many of its customers, which involve multiple contractual arrangements with varying terms, conditions, and expiration dates. The division’s operating results could be adversely affected, if its customers decide to terminate these contractual arrangements (in accordance with their terms), if the division is unable to renew them when they expire, or renew them on significantly less favorable terms. Furthermore, any systemic change in the manner in which companies in the broader Media & Entertainment industry operate, driven by broader government regulation, more significant than anticipated industry consolidation or material Technology disruption, could also have a material adverse change on operations and prospects. Risk management The division monitors these contractual arrangements through a robust customer offer review process, including Investment Committee / Management reviews to ensure that risks are adequately monitored and mitigated. Approved agreements are carefully monitored on a day to day basis, through detailed Service Level Agreements and these defined conditions are regularly monitored to ensure adherence and customer satisfaction. These mitigations will be particularly emphasized in the short-term as most of the key contracts are subject to renewal in the coming years. The division is actively pursuing multiple initiatives to diversify its business activities and thereby further reduce the risk associated with a concentrated customer base. These initiatives include an existing and ongoing effort to grow supply chain related services (warehousing, fulfillment, transportation, etc.) for customers outside the Media and Entertainment industry. Labor force availability [G4-DMA Employment] GRI Risk description Given the seasonality of its business, the division relies heavily on temporary labor resources during peak periods in many of its facilities. The availability and cost of these resources can vary based on the general employment environment in the local area, competition from other employers of temporary labor, as well as regulatory actions such as minimum wage requirements. Insufficient temporary labor resources could result in the inability to adequately meet customer service levels, and likewise minimum wage increases could lead to a higher than expected cost of temporary labor. More generally, work slowdowns or stoppages could also have a

material adverse effect on the division’s business, financial condition, results of operations or prospects. Risk management For temporary labor, the division utilizes a multifaceted approach to minimize potential risks of labor shortage, including maintaining relationships with multiple staffing agencies in each major operating area, establishing and maintaining direct relationships with local seasonal workers, and proactively seeking alternative labor pools wherever possible. Risk description The DVD Services Division’s inability to obtain timely delivery of raw materials of acceptable quantity and quality could result in material delays, increased costs, and reductions in shipments of the DVD Services division’s products, any of which could increase its operating costs, harm customer relationships, or materially and adversely affect the DVD Services division’s business and results of operations. See more details on suppliers’ dependency in the risk related to “Raw material availability and volatility”. Customers require a high flexibility and reactivity with short lead time following their purchase orders. The DVD Services division operates two main manufacturing facilities for the replication of DVDs (one in Poland and one in Mexico) and various distribution facilities globally. These facilities are subject to operational risks, including mechanical and IT system failure, work stoppage, transportation disruption, customs blockage and natural disasters. Any interruption of activity in the DVD Services Division’s production, manufacturing or distribution facilities due to these or other events could result in the disruption to the operation of the DVD Services division’s activities, which could have an adverse effect on the business, financial condition and/or results of operations. In addition, the DVD Services Division operates high production replication lines which are required to meet high quality standards. The failure to meet these requirements may lead to product quality issues or delays in the supply. Risk management To mitigate the risks inherent to its suppliers, the Sourcing Department has established procedures for operational and contractual monitoring of principal suppliers, including raw materials used in the production of DVD and Blu-ray™ discs. Supply chain and manufacturing [G4-DMA Procurement practices] GRI

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TECHNICOLOR

REGISTRATION DOCUMENT 2017