HERMES_REGISTRATION_DOCUMENT_2017

OVERVIEW OF THE GROUP

INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES

INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES RELATING TO THE PREPARATION AND PROCESSING OF ACCOUNTING AND FINANCIAL INFORMATION

1.9

1

Pursuant to Articles L. 225-100-1, L. 226-1 and L. 823-19 of the French Commercial Code (Code de commerce) , the report on the principal risk management and internal control procedures instituted within the Company appears below, using the new “Reference Framework” publi- shed by the AMF in 2010, AMF position recommendation DOC-2016-05 “Guide to periodic information addressed to all companies listed on regulated markets” and the AFEP-MEDEF Corporate Governance Code revised in November 2016. This chapter has been prepared by the Executive Management with the assistance of the Audit Committee and the relevant functional departments. Other internal control and riskmanagement procedures are described in chapter 1.8 “Risk factors”. Internal control systems rely on ongoing, recurring actions that are inte- grated into the Company’s operating processes. They apply to all func- tions and processes, including those associated with the production of financial and accounting information. The Hermès internal control objectives are to ensure: s proper observance of the Group management’s instructions and strategy directions; s operating efficiency of the Company’s internal procedures, particu- larly those that help to protect its assets, as well as the safety and security of property and persons; s the reliability of financial information and, in general, the internal control system enables the Company to maintain control over its acti- vities, to enhance the efficiency of its operations and to optimise the use of its resources. s compliance with laws and regulations; 1.9.1 OBJECTIVES OF RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS AT HERMÈS INTERNATIONAL

s the reliability of information circulated and used in-house by Group management; s the reliability of the published accounts and of other information reported to investors. Oversight of the accounting and financial organisation Hermès has set up an organised, documented system to ensure the consistency of reported consolidated accounting and financial data. This system is based on a Group management manual, strict division of res- ponsibilities, and on Hermès International’s tight controls on information produced by the subsidiaries. The internal control process for accounting and financial information involves the following parties: s the Group management, which is carried out by the Executive Committee, led by Executive Management. As part of the parent company and consolidated financial statement review and approval process, the Executive Management receives all information that it deems to be useful, such as information on the main options applied for the reporting period, accounting estimates and changes in accounting methods. It analyses the subsidiaries’ accounts on a regular basis and meets with their Senior Executives from time to time, particularly during the budget preparation and account closing periods. Lastly, it reviews the findings of the Statutory Auditors; s the Supervisory Board, which exercises ongoing control over the Company’s management. By consulting Group management, the Board can verify that oversight and control systems are adequate to ensure that the financial information published by the Company is reliable. It has the same powers as the Statutory Auditors and receives the same documents that they do, at the same time; s the Executive Vice-President of Governance and Organisational Development, member of the Executive Committee, who ensures the implementation of adequate methods (organisation, skilled resources, tools) and oversees A&RMD responsible for the internal control and risk management initiative; s the Executive Vice-President Finance, member of the Executive Committee, who ensures the implementation of an initiative: • for the consolidation of financial information in accordance with IFRS accounting standards, • for the monitoring and coordination of activity during regular reviews (year-end and half-year accounts closure, estimation updates and budgets), • for the external communication of financial information in accor- dance with regulations. They are supported by consolidation, management control and inves- tor relations departments;

INTERNAL CONTROL SYSTEM FOR ACCOUNTING AND FINANCIAL INFORMATION

1.9.2

The internal control system applicable to accounting and financial infor- mation is a key component of Hermès International’s overall manage- ment system. It is designed to ensure stringent financial oversight of the Company’s business activities. It encompasses all processes involved in producing and reporting accounting and financial information for the parent company and the companies integrated into the consolidated financial statements. It meets the following objectives: s the prevention and identification of any accounting or financial fraud or inconsistencies, as much as possible;

2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

45