TECHNICOLOR_REGISTRATION_DOCUMENT_2017

- 3 RISKS, LITIGATION AND CONTROLS Risk factors

Risk management To mitigate the risks inherent to its suppliers, the Sourcing Department has established detailed procedures for operational, quality, and contractual monitoring of our main suppliers, including Contract Electronic Manufacturers in Asia and Latin America, and suppliers of key components such as integrated circuits or memory chips. Sales and Operations Planning (S&OP) reviews take supply chain risks into consideration for order quantity and timing. Electronic data interchange (EDI) allows Connected Home to communicate electronically demand and order information more quickly and transparently with vendors and customers. An automation and optimization initiative of global supply chain process to support sales and operations planning; customer forecast, commitments, Materials Resources Planning (MRP), EDI, logistics is underway which is intended to deliver greater efficiency and transparency. Regular Meetings are held with vendors to review supply chain performance and customer demand. Third party production vendors’ facilities are required to maintain disaster recovery and Business Continuity Plans. Products development and cybersecurity [G4-DMA Products and services] [G4-DMA Customer privacy] GRI Risk description The Connected Home segment develops products and services based on its customers’ specifications and commits contractually on a release date. Some developments may become more expensive or take a longer time than initially planned due to unexpected challenges in the development cycle, potential quality issues linked to the technological complexity of the products, resource constraints or dependency on third parties deliveries. In addition, the segment’s products may be vulnerable to hacking or other types of malicious attacks. As the threat against the Internet of Things (IoT) includes massive scale attacks leveraging this type of permanently connected devices, the segment might be exposed to unanticipated liabilities or extra cost for remediation or compensations of prejudices. If materialized, this risk may impact the Connected Home segment’s profitability or create customer dissatisfaction with potential penalties and damage to Technicolor’s reputation.

Risk management The centers for product development or implementation of services include quality assurance functions that are responsible for establishing and measuring suitable quality indicators and developing Action Plans to improve the quality of the products and services. These quality programs include short and Medium-Term Improvement Plans developed from quality studies with customers. These programs are also developed with the segment’s main solutions and component suppliers and their effectiveness is assessed through quality audits. The projects are managed through a methodology defined and enforced in order to monitor systematically the product life cycle. The main milestones of the projects are subject to management review to address any issue and the main project risks. In addition, a project quality plan is defined to secure the quality of the project delivery. To ensure high security standards, a security approval procedure is in place for the new products delivered by the Connected Home Segment. This procedure is part of the product development project management methodology. Once products are delivered, an incident response procedure is in place to support customers. This procedure includes a vulnerability disclosure protocol, to allow security researchers to report such weakness on Connected Home products and allow to address risk before public disclosure and/or materialization of the risk. GLOBAL MARKET AND 3.1.2 INDUSTRY RISKS [G4-2] GRI Develop relevant innovation Risk description The Group has oriented its strategy and Investment Plans based on the Group’s expectations regarding the development of its markets and corresponding technologies. The Group’s expectations and scenarios may not be accurate, which may require adjustments in its strategy, the research priorities of the Group. Should the Group’s choices for the research priorities not be the right one, or should it not deliver the expected outcomes, the Group revenue and profitability would be negatively impacted.

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TECHNICOLOR

REGISTRATION DOCUMENT 2017