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Moncler, through the normal business management and the development of its strategy, is exposed to different types of risks that could adversely affect the Group’s operating results and financial position.

 

The most important business risks are constantly monitored by the Control, Risks and Sustainability Committee and periodically reviewed by the Board of Directors, which is responsible for the development of the strategy.

 

RISKS ASSOCIATED WITH THE MARKET IN WHICH THE GROUP OPERATES AND WITH GENERAL ECONOMIC CONDITIONS
Moncler operates in the luxury goods sector which is characterized by a high correlation between the demand of goods and the wealth, economic growth and stability in the markets where the demand is generated. In addition, the Group’s ability to develop its business depends to a significant extent on the economic situation of the various countries in which it operates.
Although the Group operates in a significant number of countries around the world, thereby reducing the risk of high concentration, the possible deterioration of economic conditions in one or more markets in which it operates may have a negative impact on sales and financial results of the Group.

 

RISKS ASSOCIATED WITH IMAGE AND BRAND RECOGNITION
The luxury goods sector in which Moncler operates is influenced by changes in clients’ tastes and preferences, but also by different habits in the regions in which it operates. In addition, the Group’s success is significantly influenced by the image, perception and recognition of the Moncler brand. The Group strives to maintain and enhance the strength of the Moncler brand, paying particular attention to the quality of the products, the design, the innovation, the communication and the development of its own distribution model, by looking for selectivity, quality and sustainability. Moncler is committed to integrating sustainability assessments in its actions and decisions, since the company believes that the continue creation of value for its stakeholders is an essential priority for its reputation.
In case the Group will not be able in the future to maintain a high image and brand recognition, through its products and activities, sales and financial results may be affected negatively.

 

RISKS ASSOCIATED WITH KEY MANAGEMENT PERSONNEL
Moncler’s results and success depend significantly on the ability of its executive directors and other members of management, which have had a decisive role in the development of the Group and which have a significant experience in the luxury goods sector.
Even though Moncler believes that it has an operational and managerial structure capable of ensuring the continuity of the business, if the existing relationship with some of these individuals were to be interrupted without proper and timely replacement, the competitive ability of the Group and its growth prospects may be affected, with a resulting negative impact on the economic and financial position of the Group.

 

RISKS ASSOCIATED WITH RELATIONSHIPS WITH THIRD PARTY MANUFACTURERS
Moncler directly manages the development of the collections and the purchase of raw materials, while for the production of its garments it uses both independent third party manufacturers, who operate under the close supervision of the Group, and internal production.
Although the Group does not depend to a significant extent on any given manufacturer, there is the possibility that any interruption or termination for any reason of the relationship with these manufacturers may materially affect the Group’s business with a negative impact on sales and earnings.
Moncler maintains constant and continual control over its group of third-party manufacturers in order to ensure there is full compliance, among other things, with labour laws and environmental laws and with the principles of Moncler’s Code of Ethics and Code of Conduct for Suppliers. Moncler performs audits at these third-party manufacturers and at their sub-suppliers. The risk cannot be excluded, however, that any one of these might not fully comply with the agreements entered into with Moncler.

 

RISKS RELATED TO THE COST AND AVAILABILITY OF HIGH QUALITY RAW MATERIALS, TO THE CONTROL OF THE SUPPLY CHAIN AND TO THE RELATIONSHIPS WITH SUPPLIERS
Moncler’s products require raw materials of high quality, including, but not limited to, nylon, down and cotton. The price of raw materials depends on a wide variety of factors largely beyond the control of the Group and difficult to predict.
Although in recent years Moncler has not encountered any particular difficulties in the purchasing of high quality raw materials to the extent appropriate, it cannot be excluded that there could be some tension on the supply side that could lead to a shortage of supply resulting in an increase in costs that could have a negative impact on the financial results of the Group.
Moncler adopts a stringent policy with all its raw material suppliers, who are required to abide by clear commitments to quality and compliance with current legislation on worker protection, animal protection and environmental protection. With regards to animal welfare, Moncler created a multi-stakeholder forum, which approved the DIST (Down Integrity System and Traceability) Protocol, focused on the down. All suppliers have to scrupulously comply with it, in order to guarantee the traceability of raw materials, animal welfare and the highest quality standards for all the supply chain.

RISKS ASSOCIATED WITH THE DISTRIBUTION NETWORK
Moncler generates an increasing portion of its revenues through the retail channel, consisting of directly operated mono-brand stores (DOS) and the online store. The Group has over the years demonstrated the ability to open new stores in the most prestigious locations in the most important cities in the world and within high profile department stores, despite strong competition among key luxury goods players to secure these positions. This is the reason why the fact that the Group might face difficulties in opening new stores, which could have a negative impact on the growth of the business, should not be excluded.
In addition, by its nature, the retail business is characterized by a great incidence of fixed costs, mainly related to rental agreements. Although Moncler’s management showed the ability in the years to develop a profitable retail business, it cannot be excluded that a potential turnover slowdown could reduce the Group’s capability to generate profits.

 

RISKS RELATED TO BRAND AND PRODUCT COUNTERFEITING AND THE PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
The luxury goods market is known to be prone to brand and product counterfeiting.
Moncler has made considerable investments in the adoption of innovative technologies which allow products to be tracked along the value chain, to prevent and mitigate the effects of counterfeiting of its brands and products and to protect its intellectual property rights in the territories in which it operates. However, it cannot be excluded that the presence on the market of significant quantities of counterfeit products may adversely affect the image of the brand, with a negative impact on sales and operating results.

 

RISKS RELATED TO THE EVOLUTION OF THE REGULATORY FRAMEWORK
Moncler operates in a complex international environment and is subject, in the various jurisdictions in which it operates, to rules and regulations which are constantly monitored, especially for all matters relating to the health and safety of workers, environmental protection, rules around manufacturing of products and their composition, client protection, the protection of intellectual and industrial property rights, competition rules, fiscal rules, and, in general, all relevant regulatory provisions.
The Group operates following the legal provisions in force. Nevertheless, since the legislation on some matters, especially on tax issues, is characterized by a high degree of complexity and subjectivity, it cannot be excluded that a different interpretation to that of the Group could have a significant impact on the results.
The enactment of new legislation or amendments to existing laws which may require the adoption of more stringent standards could lead, by way of example, to costs of compliance linked to the production process or the features of the products, or could even limit the Group’s operations with a negative impact on the financial results.

 

EXCHANGE RATE RISKS
Moncler operates in international markets using currencies other than the Euro, of which mainly Yen, U.S. Dollar, Renminbi and Hong Kong Dollar. Therefore it is exposed to the risk associated with fluctuations in exchange rates, equal to the transaction amount (mainly income) which are not covered by a matching transaction of the same currency. In 2014, the Group initiated a strategy to gradually hedge the risks associated with exchange rates fluctuations limiting its actions to the so called “transactional risk”.
However, also due to the so called “translational risk”, arising from the translation in Euro of financial statements of foreign companies denominated in local currency, it cannot be excluded that significant changes in exchange rates could have an positive or negative impact on the Group’s results and financial position.
For more information, please refer to the specific section 9.1 of the Notes to the Financial Statements.

 

INTEREST RATE RISKS
The Net Financial Position of the Group consists of cash and bank loans denominated primarily in Euros and is subject to interest rate risk. The Group, in order to partially hedge the interest rate risk, has entered into some hedging transactions.
However, any significant fluctuations in interest rates could lead to an increase in borrowing costs, with a negative impact on the Group’s financial results.
For more information, please refer to the specific section 9.1 of the Notes to the Financial Statements.

 

CREDIT RISK
Moncler operates in accordance with the credit control policies aimed at reducing the risks resulting from insolvency of its wholesale clients. These policies are based on preliminary in-depth analysis of the reliability of the clients and based on eventual insurance coverage and/or guaranteed form of payment. In addition, the Group has no significant concentrations of credit.
However, it cannot be excluded that the difficulty of some clients may result in losses on receivables, with a negative impact on the Group’s financial results.
For more information, please refer to the section 9.2 of the Notes to the Financial Statements.

 

LIQUIDITY RISK
The Group has implemented financial planning process aimed at reducing the liquidity risk, also taking into consideration the seasonality of the business. Based upon the financial requirements, credit lines required to meet those needs are planned with the financial institutions and are classified be- tween short-term and long-term.
For more information, please refer to the section 9.3 of the Notes to the Financial Statements.

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