2023 universal registration document

3. Risk factors and risk management

Business risks/Safety of people and property
Risk identification Risk management

As a worldwide group operating in 79 countries and across more than 400 sites (excluding stores and point-of-sales outlets of distributor customers), the Group is exposed to a variety of risks inherent to the environment in which it performs its activities (war, geopolitical, climate, health/pandemic, economic and social risks, malicious acts, climate and natural disasters). The direct and indirect consequences of these risks may adversely affect people and the assets of the Group (tangible and intangible).

In order to permanently protect these persons and resources (or Group assets) against malicious acts, the Security Department helps in the preventive implementation of technical, HR and operational procedures to limit the residual risk of malicious damage and support the Group’s international development in all countries concerned. The Security Department has developed a worldwide resilience improvement programme for this purpose:

  • coordinates, with related key players, the security crisis management procedure which is tasked with preventing, managing and limiting the consequences of undesirable events on the Group worldwide;
  • coordinates the deployment of business continuity plans for all administrative sites;
  • coordinates assistance for Group employees who travel for international assignments;
  • has implemented a watch and evaluation of the state of security in the countries in which the Group is active;
  • conducts evaluation updates in the countries in which it is present;
  • establishes processes for alerting and reporting, mobilisation, decision‑making using the CALM method, demobilisation and feedback;
  • defines the minimum security standards to be implemented to protect the Group’s activities;
  • organises learning sessions and runs crisis management exercises for all entities affected; and
  • develops tools to be put into action at the very start of the crisis: the POB (People On Board) and the Security Check are primarily used to assess impacts on people.

The security measures are regularly adjusted and reassessed based on the local situation and the level of exposure of employees and sites.
3.5.3.2. Industrial and environmental risks 
Industrial and environmental risks/Product availability  
Risk identification Risk management

In the context of a globalised supply chain and the increased geographic concentration of certain supply sources, the failure of an external supplier to deliver raw materials, filling and packaging articles or finished products, whether resulting from operational difficulties or significant non-compliance with ethical commitments, along with a major interruption of operations in a L’Oréal industrial unit or shipping hub, could impact the Group’s sales because of the unavailability of products that could result from this.

In 2023, Group purchases related to production totalled €6.4 billion or more than 15% of its net sales. The impact and management of risk associated with the availability of products caused by climate change are described in the risk factor entitled “Climate Change”.

L’Oréal regularly revises its security inventory policies for expected risks, anticipates growth scenarios, reserves capacities with its suppliers and negotiates long-term contracts with them. There are business continuity plans for each operational site. The Group is currently deploying a single methodology of business continuity plans at all its factories and distribution centres. These plans aim to anticipate disruption at Group supply chain sites and ensure a timely business continuity. L’Oréal has set up a centralised raw materials team that uses action plans to manage and anticipate risks of raw materials not being available, including seeking alternative sources and reviewing formula design. For its packaging, L’Oréal duplicates moulds for its strategic products, implements operational continuity plans with its suppliers and reviews, if required, the design of its formulas and finished products. The main suppliers and subcontractors are asked to comply with the Letter of Mutual Ethical Commitment, which covers, in particular, Human Rights, working conditions, environmental protection and integrity.