Universal Registration Document 2021

RISKS, LITIGATION, AND CONTROLS RISK FACTORS

INTEREST RATE AND EXCHANGE RATE FLUCTUATIONS

Risk identification

Risk monitoring and management

Management of interest rate and exchange rate risks is done by the Group treasury in accordance with Group policies and procedures. All financial market risks are monitored continually and reported regularly to the Chief Financial Officer, the Investment Committee and the Audit Committee via various reports showing the Company’s exposures to these risks with details of the transactions undertaken to reduce them. For each type of transaction, specific limits and authorizations are approved by the Investment Committee. To reduce interest rate and currency exchange rate risk, the Group enters into hedging transactions using derivative instruments. See note 8.5.3 to the consolidated financial statements for more information about this risk and its management.

The Group is mainly exposed to interest rate risk on its deposits and indebtedness. At December 31, 2021, 87% of the Group’s debt was at floating rates. Failure to manage interest rate fluctuations effectively in the future, or changes in interest rates, may have a material adverse impact on the Group’s financial charges. A 100-basis point increase in short-term interest rates would cause the Group’s net cash interest payments to increase by €7 million. The Group incurs foreign currency translation risk because a significant part of its consolidated revenues as well as a portion of its assets are in subsidiaries that use currencies other than the euro and in particular the U.S. dollar as their functional currency. In 2021, 68% of the Group’s consolidated revenues were in U.S. dollars. To the extent that the Group has costs in one currency and has sales in another, the Group incurs foreign currency transaction risk, and its profit margins may be affected by changes in the exchange rates between the two currencies. Most of Technicolor’s sales are in U.S. dollars and in euro; however, certain expenses are denominated in other currencies. The largest transaction exposure of the Group is its net purchase of U.S. dollar versus the euro which totaled $136 million in 2021. Although the Group may hedge against currency transaction risk, given the volatility of currency exchange rates and the occasional illiquidity in some emerging market currencies, together with the potential for changes in exchange control regulations in such emerging markets, the Group cannot ensure that it will be able to manage these risks effectively. Foreign exchange rate fluctuations have had and may in the future have an adverse impact on the Group’s operating results and financial condition, especially when the euro fluctuates significantly against the U.S. dollar or other foreign currencies. The Group’s largest currency exposure is to the U.S. dollar versus the euro. A 10% increase in the U.S. dollar versus the euro, assuming no hedging was in place, would cause the Group’s profit from continuing operations before tax and finance costs to decrease by €18 million. A 10% decrease in the U.S. dollar versus the euro would have a symmetrical impact in the opposite amount.

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TECHNICOLOR UNIVERSAL REGISTRATION DOCUMENT 2021