PERNOD RICARD - 2018-2019 Universal registration document

4.

RISK MANAGEMENT Risk factors

Fraud 9.

Risk identification and description

Potential impacts on the Group

Pernod Ricard is exposed to the risks of fraud, notably due to its presence in a wide range of countries, its accelerating digitalisation and to constantly evolving threats.

From theft to cyber criminality, any type of occurrence could lead to financial losses (including legal costs to recover defrauded sums and products), leakage of sensitive information or theft of major physical assets. It could also have a significant impact on the Group’s reputation.

Risk control andmitigation To mitigate risk, the Group has implemented training measures (e.g. the MOOC on internal control) to raise fraud awareness among Pernod Ricard employees. In addition, a strong internal control framework – relying on the Group internal control principles and related tools – has been set up across the Group to limit the risk of occurrence. Further, the Group conducts internal and external audits each year to control the effectiveness of the measures in place.

Industrial and environmental risks II. Climate change and environmental damage 1 1.

Risk identification and description

Potential impacts on the Group

The environment is one of the biggest challenges facing Pernod Ricard. This challenge can be seen in the following: the impact of climate change on our activities, with threats to the — supply of rawmaterials including grapes and grain, or through risks related to the management of water resources (earthquakes, floods, etc.); and damage caused by Pernod Ricard in its operations (greenhouse gas — emissions, accidental pollution).

Increasingly irregular crop yields, climate events such as frost, hail and drought and shifting climatic boundaries can affect the quality, availability and, to a greater extent, the price of rawmaterials. Where grains are concerned, this effect, coupled with rising global demand, is contributing to the increasing volatility of market prices, which must be taken into account in procurement strategies and economic supply models. As regards grapes – another of the Group’s key raw materials – climate models point to an increase in alcohol content in wine, changes to certain qualitative parameters and change in phytosanitary pressure, and the risk of frost or drought, which vary depending on geography. A similar risk exists in relation to the water supply for production sites: a number of sites use underground water tables for their water needs and these can also be affected by climate change. From a regulatory point of view, environmental issues, and in particular climate-related issues, are leading to stricter regulations on carbon emissions. In Europe, the Group’s three largest distilleries are subject to the European Union carbon emission trading system (EU-ETS). The direct financial challenge is moderate for Pernod Ricard, but can be expected to increase significantly in the years to come. The economic impact of regulations on energy and carbon is also felt through indirect consumption via our suppliers (especially with respect to glass, alcohol and transport).

Risk control andmitigation For grapes, the relevant inter-professional organisations, such as those for cognac and champagne and the corresponding organisations in Australia and New Zealand, have incorporated this issue into their research programmes in order to adapt their practices to the changes (choice of grape varieties, vine training, vinification, etc.). A comparable risk exists for the water supply of production sites. The availability and quality of water are therefore key factors for the quality of our products, and are monitored very closely. Responsible water management is a significant component of the Group’s environmental policy: each site has to ensure that the use of groundwater or river water and the release of waste water back into the environment do not harm nature. Sites located in areas identified as high risk in terms of water supply are subject to enhanced monitoring so as to ensure the sustainability of resources used.

Note that this risk is also covered in Section 3.3.3.2 of the Extra-Financial Reporting. 1

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PERNOD RICARD UNIVERSAL REGISTRATIONDOCUMENT