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2016 REGISTRATION DOCUMENT
HERMÈS INTERNATIONAL
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CORPORATE GOVERNANCE
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REPORT FROM THE CHAIRMAN OF THE SUPERVISORY BOARD ON THE CORPORATE GOVERNANCE PRINCIPLES
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participate in self-assessment of internal control work;
s
spread the culture of internal control to all employees;
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perform monitoring of the action plans of risk mapping;
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follow up on the audit recommendations of the A&RMD.
The Group’s operational staff
The Senior Executives, the major functional and operating departments,
and members of the Management Committees of the Group’s various
entities serve as the main conduits for applying internal control and risk
management; they are themain beneficiaries of the systemand also key
contributors to its proper operation.
Control activities carried out at the level of each entity fall under the joint
responsibility of the Executive Vice President and Financial Executive
Vice President, as established by the signature of a letter of representa-
tion relating to the knowledge of the Hermès internal control objectives
and of the quality of the controls implemented within the entity. To this
end, they rely on the results of an annual self-assessment questionnaire
on the implementation of the internal control system.
3.2.6.5
Risk management system
The Group’s risk management process is based upon the preparation of
risk maps as well as a range of complementary tools that facilitate the
identification of risks and help to define the actions necessary to best
deal with them.
Set up in 2004, the mapping initiative has been rolled out to the main
entities under the supervision of the A&RMD.
These maps serve to identify, evaluate and systematically rank the main
risks. They represent a lever for performance improvement, as they
contribute to the protection of company value and assets. These are
effective management tools that provide a comprehensive and shared
vision of the risks and define operational action plans and responsibi-
lities of stakeholders. The risk maps are updated periodically by each
company under the supervision of the A&RMD.
The internal control managers within the entities are the local relays for
the mapping initiative. They participate in the initial risk analysis, while
updating and monitoring the action plans.
Group risk mapping is established and updated annually. It takes into
account locally identified risks and individual interviews held with Group
management. This document, which enables the consolidation of the
main action plans, is shared with the Audit Committee. Prioritisation of
risks carried out by Group management is also shared with the entities
in order to be included in the mapping carried out locally.
In 2015, the A&RMD carried out a specific mapping exercise concerning
the risk of fraud, with action plans monitored.
Hermès International has also deployed specific processes to monitor
certain risks through specialised committees or working groups. These
committees meet on a regular basis. For example, committees focusing
on real estate risks, transportation safety, IT risks and treasury risks ana-
lyse the issues, and study the appropriate corrective measures so that
they are deployed in the entities. They also check that existing control
systems comply with Group procedures. The main operational contacts
involved take part in these committees, as does A&RMD, whose role is
to facilitate the identification of risks and of the associated action plans.
A Group Security Committee was formed in 2016. Its role is to arbitrate
on cross-functional topics of security and monitor the functioning of the
specialised committees.
The A&RMD is also able to modify its work programme and carry out
ad
hoc
assignments in order to deal with new risks, particularly in the event
of an alert issued by a Group division.
Finally, an IT platform for the sharing of incidents not only enables
assessment of the changes of certain risks, but also the apprehension,
early on, of any possible signs of weakness. It’s a preventive tool that
allows for the constant improvement of the control system, to correspond
to actual conditions as closely as possible.
3.2.6.6
Internal control system
Organisation
The Company’s management is organised into an Executive Committee
and several specialised committees, and ensures that strategic direc-
tions are followed consistently and that information is disseminated
effectively. Detailed organisational charts and memoranda outlining
strategic directions give staff members a thorough understanding of
their role in the organisation and a way to periodically evaluate their per-
formance by comparing it with stated targets. The Group’s organisation
is based on an approach designed to foster a high level of accountability
among local managers, whose duties and responsibilities are clearly
defined.
In its human resources processes, Hermès has established hiring,
training and skills development programmes designed to enable each
individual to perform their duties effectively, now or in the future. Within
Hermès International, the finance department has primary responsibi-
lity for preparation and control of financial information (see below).
Information systems
Hermès uses effective IT tools tailored to its requirements in preparing
andcontrollinginformation.Integratedapplicationsareusedtocentralise
data reported to Hermès International by the subsidiaries, for account
consolidation and for cashmanagement. Managers have access to data
generated the management systems on a weekly and monthly basis,
giving them the information they need to manage business operations
effectively, to monitor performance consistently, and to identify any
irregularities.
The information systems are designed to ensure that the accounting
and financial information produced complies with security, reliability,
availability and relevance criteria. Specific rules on the organisation and
operation of all IT systems havebeendefined, applying to systemaccess,
validation of processing and year-end closing procedures, data archiving
and record verification.