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2016 REGISTRATION DOCUMENT
HERMÈS INTERNATIONAL
35
OVERVIEW OF THE GROUP
1
RISK FACTORS
gement andmonitoring rules. Administrativemanagement and operatio-
nal control are ensured by theMiddle & Back Office department, notably
via the use of integrated cash flow software.
Furthermore, the audit and risk management department (A&RMD)
oversees proper compliance with risk monitoring and management
procedures.
On a monthly basis, the Treasury Security Committee ascertains that
these procedures have been followed and that any risks identified have
been addressed. The Group follows a conservative investment policy,
designed to avoid the risk of capital loss and maintain liquidity in order
to be able to implement rapid and independent strategic changes.
The Group deals with leading banks and financial institutions only. In
addition, counterparty risks on financial transactions are monitored
on an ongoing basis by Hermès International’s Treasury Management
department. Most available cash is invested for the short term, mainly in
money-market mutual funds offered by leading financial institutions and
indeposit certificates issuedby top-ratedbanks, with very lowsensitivity.
The treasury management department constantly monitors changes in
legal regulations with regard to investment and derivative transactions
to ensure that the Group conforms to current regulations. Furthermore,
the finance department adjusts its procedures and tools on an ongoing
basis to accommodate changes in its environment.
1.8.3
INSURANCE POLICY
The Hermès Group’s policy regarding insurance is to transfer any expo-
sure that is liable to produce amaterial impact on profits to the insurance
market. The Group insurance programmes represent most of the insu-
rance coverage for the subsidiaries. They are placed via the intermediary
of brokers who are amongst the ten largest French brokers and with
first-rate insurance companies. The main international insurance pro-
grammes favour an “all risks except” approach and cover:
1)
property damage and operating losses that may affect production
sites, logistics centres, distribution centres or premises in France
and in other countries. The policy underwritten by FM Global was
renewed for a one-year term. The upper cover limit is €500 million.
The deductibles for direct damage vary from €15,000 to €250,000
and from €70,000 to three days’ gross profit for operating losses.
In Japan, the Group has had an earthquake insurance policy for
several years covering €40 million in direct damage and operating
losses. This insurance coverage is supplemented by a prevention/
engineering programme and prevention inspections were carried out
at 67 production and distribution sites in 2016. The recommenda-
tions issued are monitored using a stringent, formally documented
system;
2)
civil liability for damages to persons, property and intangibles caused
to third parties in the conduct of business operations or by products.
These policies were taken out for three years at 1 January 2016 with
AIG Europe and Zurich Insurance for cover amounts which take into
account the nature of the Group’s operations; the maximum cover
per event is €70 million, and the deductibles vary from €1,000 to
€10,000;
3)
the transport of products between the production sites and to the
distribution network. A policy has been taken out with Chubb;
4)
responsibilities in relation to the environment. This policy was
renewed with AIG Europe on 1 January 2015 for a period of 24 mon-
ths. The coverage limit is €7.5 million per claim and €15 million for
the period, and the deductible thresholds are €25,000;
5)
cyber risks. Like each year since 1 January 2013, the policy with
Zurich Insurance was renewed for a period of one year, covering the
reconstruction of data, operating losses following a security incident,
civil liability, and costs, notably defence and notification costs.
Other contracts had been subscribed to fulfil specific requirements, par-
ticularly in the context of building operations (new work or renovation)
carried out as project managers. In 2016, these policies were not the
subject of significant claims.