PERNOD RICARD - 2018-2019 Universal registration document

4.

RISK MANAGEMENT Risk factors

Challenges related to brand portfoliomanagement and failure to adapt to emerging trends 5.

Risk identification and description

Potential impacts on the Group

Pernod Ricard faces the challenge of adapting its organisation, portfolio, business model and route-to-market to new trends (e.g. craft spirits, little/no alcohol) and to the digital era (notably digital marketing and e-commerce) and continuing to innovate. Given the significance of ageing spirits within the Group portfolio, Pernod Ricard takes constant care to correctly align product allocation and product ageing management with demand forecasting through long-term strategic inventory management.

Potential impacts associated to this risk include loss of market share or missed growth opportunities linked to Pernod Ricard's inability to properly satisfy customer/consumer demand, negative impact on brand equity and/or on its reputation and potential excess stocks or missed sales resulting from out-of-stock situations.

Risk control andmitigation To mitigate risk, Pernod Ricard acts across its entire organisation:

from a strategic point of view, diversification of the business model, route to market and portfolio management are closely monitored; — a new innovation organisational infrastructure has been created, including the creation of Conviviality Ventures in 2017, to invest in new — businesses. There is global monitoring of the innovation portfolio and innovation roadmap in terms of services and experiences; there has been a digital transformation across the organisation. This includes the creation of a Digital Acceleration Team, the development — of new Group tools (e.g. Digital CRM engine; programmatic media buying desk; in-house digital content studios; social listening systems), eCommerce platforms (Drinks&Co, Uvinum), the transformation of HR and Finance systems (underway), all deployed with appropriate training; the monitoring of all strategic, local and trade inventory levels receives significant attention, with a particular focus on ageing goods given the — investment (FY19: approximately €5 billion on the balance sheet). The latter includes regular meetings involving the Group CEO and CFO and Brand Companies to agree on appropriate long-term forecasts and investments.

Product quality issues 1 6.

Risk identification and description

Potential impacts on the Group

The main product quality issues encountered within the Group arise from the level of quality and compliance of the:

The success of the Group’s brands depends upon the positive image that consumers have of those brands. A quality issue with one of our products affecting the integrity of its brand or its image among consumers impact the Group’s sales.

ingredients; — packaging; — production process; and — development process of our new products. —

Risk control andmitigation Quality risk management is based on a joint Quality Management approach implemented worldwilde in all production affiliates. Coordinated by the Group’s Operations Department, this risk management policy is based on internal Pernod Ricard standards and on systematic risk analysis. It draws on the guidelines setting out best practices and minimum requirements in each of the areas concerned by quality: foreign bodies (e.g. glass particles); — contamination; — traceability; — quality control; — product recall. — It is also backed up by an ambitious Quality certification process for Group production sites based on the following two international standards: ISO 9001 for quality management; — ISO 22000 for food safety management. — At the end of June 2019, 80.9% of bottling sites were ISO 9001 and ISO 22000 certified in accordance with these four standards, covering 99.8% of total bottled production.

Note that this risk is also covered in Section 3.3.3.6 of the Extra-Financial Reporting. 1

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PERNOD RICARD UNIVERSAL REGISTRATIONDOCUMENT