Risk management (events or situations, the occurrence of which is uncertain, could have a financial, non-financial, or reputational impact) is a process that applies to the Company and its consolidated subsidiaries (the “Group”). Risk management consists of identifying, assessing and controlling risks that may affect the smooth running of the Company. It also participates in the Group’s development by promoting the good use of resources to minimise the impact ofnegative events and maximise the realisation of opportunities.
In order to ensure the sustainability of its development and the achievement of its objectives, the Group strives to anticipate and manage the risks to which it is exposed in its different areas of activity. In addition, the Internal Rules of the Board of Directors specify the role of the Audit Committee which“must ensure that General Management has the means to enable it to identify and manage the economic, financial, non-financial, and legal risks facing the Group inside and outside France in carrying out its normal or exceptional operations”.
On the basis of the work by the Internal Audit Department, the analysis of major risks, in conjunction with the processes used by subsidiaries, makes it possible to identify Internal Control improvements and update the Group’s standards.
The Group’s risk mapping process is led by the Ethics, Risks and Compliance Department with the support of all Support Divisions and Business lines. This mapping is reviewed by the Group’s Executive Committee, which validates it.
The risk mapping for all of L’Oréal’s activities is updated annually. This process to identify, analyse and assess significant risks strengthens Group actions and allows them to be prioritised. The results of this work are presented to the Audit Committee. The main risks to which the Group is exposed are described below.
The Group operates in a changing environment. Like any company, it is necessarily exposed to risks which, if they were to materialise, could have a negative impact on its business activities, its financial position and its assets, particularly in terms of reputation and image.
For taking an informed investment decision, as required by the regulations in force, this section presents the major risks in a limited number of categories (given the probability of their occurrence and the expected magnitude of their negative impact) taking risk management policies into account.
In each category, the most material risks are mentioned first. This section specifies the way in which each risk factor could affect L’Oréal as well as the management policy implemented.
Risk management work classifies the residual risks by category of importance (low, moderate or significant).
However, a wholly risk-free environment cannot be guaranteed. Moreover, the Group could be adversely impacted by other risks of which it is not currently aware or which it does not consider material at the date of this document.
