PERNOD RICARD - 2018-2019 Universal registration document

4.

RISK MANAGEMENT Risk factors

Credit risk 1 3.

Risk identification and description

Potential impacts on the Group

Credit risk for the Group is dominated by the risk of financial loss stemming from a default (cash flow difficulties or liquidation) among customers indebted to a Group affiliate.

The non-recovery of a commercial receivable in the event of non-payment or liquidation of customers would have a negative impact on the Group’s financial statements.

Risk control andmitigation The diversity and multiplicity of the Group’s distribution network, spread over many countries, and the diversification of the main customers from the large retail sector, limit its exposure. Moreover, internal procedures are in place to assess the financial health of the Group’s customers and adapt credit terms and activity as appropriate. Lastly, risk of this nature is limited by the subscription of credit insurance with the standard guarantees. The Group’s risk hedging policy is based on the partial transfer of risk to insurers.

Pension funds 2 4.

Risk identification and description

Potential impacts on the Group

The Group’s unfunded pension obligations amounted to €559 million as of 30 June 2019. During FY19, the Group’s contributions to pension plans totaled €51 million. The Group’s pension obligations are for the most part covered by balance sheet provisions and partially covered by pension funds or insurance. The amount of these provisions is based on certain actuarial assumptions, including, for example, discounting factors, demographic trends, pension trends, future salary trends and expected returns on plan assets.

The asset/liability balance is subject to, among other factors, the performance of invested assets. A liquidity crisis or major financial shock could significantly undermine the performance of financial assets and jeopardise the asset/liability balance. A pronounced asset/liability imbalance may require an increase in the Group’s pension liabilities recognised in the balance sheet and result in an increase in the allowance for retirement provisions. This could have a significant negative impact on the Group’s financial results.

Risk control andmitigation Specific governance and a management policy have been implemented and are regularly reviewed in line with the risk profile of the Group’s various pension plans. The investment strategy is subject to frequent review in order to minimise the volatility of assets. In addition, defined benefit plans (mainly affiliates in the United Kingdom, North America and the rest of Europe) are subject to an annual actuarial valuation on the basis of country-specific assumptions.

Note 4.9 to the consolidated financial statements. 1 Note 4.7 to the consolidated financial statements. 2

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PERNOD RICARD UNIVERSAL REGISTRATIONDOCUMENT