LOREAL_Registration_Document_2017

1 Presentation of the Group Integrated report INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

INTERNAL CONTROL AND RISKMANAGEMENT SYSTEM 1.5.

The Group operates in a constantly changing environment and like any company, L’Oréal is necessarily exposed to risks which could have a negative impact for it if they were to materialise. In order to ensure the sustainability of its development and the achievement of its objectives, the Group strives to anticipate and manage the risks to which it is exposed in its different areas of activity. L’Oréal’s risk management consists in identifying, managing and controlling risks that may affect the smooth running of the Company. It also participates in value creation by promoting the good use of resources to minimise the impact of negative events and maximise the realisation of opportunities. Risk management therefore goes beyond a strictly financial framework. By contributing to preventing and managing the risks to which the Group is exposed, the purpose of the Internal Control system is to enable the Group’s industrial and economic development to take place in a steady and sustainable manner in a control environment appropriate for the Group’s businesses.

In L’Oréal, Internal Control is a system that applies to the Company and its consolidated subsidiaries and aims at ensuring that: economic and financial targets are achieved in s compliance with the laws and regulations in force; the orientations set by General Management are followed; s the Group’s assets are valued and protected; s the Group’s financial and accounting information is reliable s and provides true and fair statements. The control environment, which is critical to the Internal Control system, good risk management and the application of procedures, is based on people, behaviour and the organisational structure. In L’Oréal, it forms part of a culture of rigour and commitment communicated by senior management and is also in line with the Group’s strategic choices. Risk management and Internal Control are the affair of everyone, from all the employees to the governance bodies. The Internal Control system is the subject of ongoing supervision in order to verify whether it is relevant and meets the Group’s objectives and addresses its issues. See also chapter 2. Risk factors and control environment.

Level 3 Conducted by Audit (internal or external). It assesses how well the system is working and contributes to its improvement.

A u d i t C o m m i t t e e

A u d i t

PERIODIC CONTROL PERMANENT CONTROL

Level 2 Conducted by the Support Divisions in their fields of competence. Define cross-cutting policies/standards. Support the divisions in implementing them.

I n t e r n a l C o n t r o l D e p a r t m e n t S u p p o r t D i v i s i o n s

c o n t r o l H e a d s o f I n t e r n a l C o l l a b o r a t o r s

Level 1 Conducted by each employee and their superiors in the day-to-day implementation of their activities.

REGISTRATION DOCUMENT / L'ORÉAL 2017

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