TECHNICOLOR_REGISTRATION_DOCUMENT_2017

3 - RISKS, LITIGATION AND CONTROLS Risk factors

Supplier and key component dependency [G4-DMA Procurement practices] GRI

When possible and in line with the procurement strategy, the Connected Home Division has identified alternative sources for some of its key materials and components. Though it may limit its ability to negotiate the most favorable terms, these alternative sources are established to reduce dependency on key suppliers. In the case of sole or very limited source suppliers, as this is the case for memories, the Company has put in place a monitoring structure in charge of keeping watch of the price pressure of some components and anticipate possible shortages. In case those risks materialize, the Company may initiate mitigation actions such as the inclusion of key material price index provisions in the customer contracts or negotiations with customers to compensate for sudden unexpected price variation. Supply Chain management [G4-DMA Procurement practices] GRI Risk description Connected Home outsources extensive operational activities, including manufacturing and logistics, except for a manufacturing facility in Manaus, Brazil. Reliance on external suppliers and manufacturing partners means Connected Home may be exposed to the effects of production delays or other performance failures of its suppliers. Any delays in the availability of key components and sub-assembly parts, production, quantity or delivery could adversely affect Connected Home’s reputation or operating performance. Please see Supplier and Key Component Dependency risk description here above for more details. Connected Home manages its inventory on a just-in-time basis, which exposes it to supplier performance risks, as well as to certain force majeure risks. As a result, Connected Home’s operations may be disrupted by external factors beyond Connected Home’s control ( e.g. vendors’ mechanical and IT system failure, work stoppage, transportation disruption, customs blockage and natural disasters). In addition, the industries of Connected Home’s main suppliers may experience a further wave of consolidation, thereby reducing Connected Home’s negotiating leverage. Consequently, the ability to meet business objectives may be negatively impacted, and Connected Home’s operational results could be adversely affected in the event of any severe or prolonged disruption.

Risk description Technicolor manufactures and integrates products that are highly dependent on the procurement of key components, sub-assembly parts, and on the design by a limited number of suppliers and sub-contractors. This dependence on suppliers involves several risks, including limited control over pricing, availability, quality and delivery schedules. Shortages of raw materials or components, quality control problems, production capacity constraints or delays by suppliers creates a risk of interruptions in the availability of our products, which could reduce our net sales, adversely affect our results of operations and deteriorate our customer relationship. In addition, if our suppliers experience such problems, they may give priority to other customers in possible Technicolor’s disadvantage. The market price increases for DRAM and Flash memories in 2017 is an illustration of this dependency of the Connected Home business on a very limited number of memory suppliers. The memories are used in a much broader range of products than for the Connected Home business, such as smartphones, PCs, and tablets, and the global imbalance between supply and demand has created a sudden and very material price increase of the cost of such memories. The difficulty to mitigate this risk can impact significantly the profitability The selection process on suppliers is made after careful assessment of the production capacity, quality standards, financial health and respect of social and environmental standards. To reduce dependency and allow business continuity, the procurement is diversified with some preferred vendors present in different geographies. The Company strives to foster a strong collaboration with its key suppliers to properly integrate all activities. Some longstanding suppliers have become partners which whom a strong contract management allowing flexibility in the supply has been created. Scorecards with vendors are implemented to allow a proper monitoring of the vendor performance. of Connected Home. Risk management

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TECHNICOLOR REGISTRATION DOCUMENT 2017