MAIN RISKS

The regular management of its business and the development of its strategy expose the Moncler Group to various types of risks that could adversely affect the Group’s operating results and its financial position. These risks are integrated into the corporate enterprise risk management (ERM) process. The entity responsible for managing ERM promotes coordination between the internal functions involved, in order to ensure consistency and effectiveness in overseeing and monitoring the main risks within the corporate organisation.
The most important business risks are monitored by the Control, Risks and Sustainability Committee and periodically examined by the Board of Directors, which takes them into account in developing the strategy.
RISKS RELATED TO ARMED INTERSTATE CONFLICTS
Several armed intestate conflicts, among which the conflict between Russia and Ukraine and between Israel and Palestine have major global consequences not only in terms of severe humanitarian crisis, but also in terms of economic effects on the global markets, reflected among other things in increases in lead times and cost of transport, in energy and raw material costs.
The Group has no suppliers of raw materials nor manufacturing sites, nor stores located in affected territories. However, the escalation of the conflicts could have unpredictable repercussions on neighbouring countries where the Group produces, with an impact on production capacity, e.g. as a result of the temporary disruption in the power supply, and on procurement times and costs. The situation is constantly monitored in order to be able to react promptly to any intensification of the conflicts.
RISKS ASSOCIATED WITH THE MARKETS IN WHICH THE GROUP OPERATES AND GENERAL GEOPOLITICAL AND ECONOMIC CONDITIONS
The Group operates in the luxury goods sector, where there is a significant correlation between the demand for goods and the level of wealth, the level of economic growth and political stability in the countries where demand is generated. The Group’s ability to develop its business also depends on the political stability and economic situation of the various countries in which it operates.
Although Moncler operates in a significant number of countries around the world, reducing the risk of a high concentration of the business in limited geographical areas, any deterioration in economic, social or political conditions in one or more markets in which it operates could have negative consequences for sales and economic and financial results.
The possible introduction by national or supranational entities of constraints on the movement of individuals – as a result, for example, of international crises or pandemics –, terrorist attacks, as well as the tensions in Asia-Pacific area and the introduction of new duties or any export limitations as a result of trade or financial sanctions, could also affect sales, particularly in relation to specific geographical areas. In particular, in recent years the importance of Asian markets for the luxury goods sector has increased, reaching around half of turnover for the Moncler brand at the end of 2024, whereas Stone Island, having only recently begun its international expansion, particularly in Asia and America, remains more exposed to the European market (67% of revenues in fiscal year 2024).
CYBER RISKS AND PERSONAL DATA PROTECTION RISKS
The rapid technological evolution and growing organisational complexity of the Group, together with the increasing sophistication and frequency of cyber attacks, do not exclude the potential risk to the Group of cyber attacks through the use of innovative attack techniques.
Moncler is investing significantly in its model for managing cyber risks with a view to business continuity and data protection, adopting the best technologies and methodologies for vulnerability identification and system protection, ensuring the presence of qualified cyber security expertise, staff training and a careful process of periodic risk assessment and review. For more information, please refer to Section Three – Consolidated Sustainability Reporting.
RISKS RELATED TO THE COST AND AVAILABILITY OF HIGH QUALITY RAW MATERIALS, SUPPLY CHAIN CONTROL AND SUPPLIER RELATIONS
Moncler and Stone Island brand products require high-quality raw materials, including, but not limited to, down, nylon, cotton and wool. The price and availability of raw materials depend on a wide variety of factors, which are largely beyond the Group’s control and difficult to predict.
Although the Group has always managed to ensure a supply of raw materials adequate to its production requirements in terms of quantity and quality, hypothetical further tensions on the supply side could lead to difficulties in supply and a further increase in costs, with negative consequences for the Group’s economic results. In order to minimise the risks associated with the potential unavailability of raw materials in the timescales required for production, Moncler adopts a multisourcing strategy for supplier diversification and plans purchases with a medium-term time horizon. In addition, suppliers of raw materials must meet precise contractual quality, composition and performance requirements and comply with applicable laws on worker protection, working conditions, local labour laws, respect for animal welfare, the environment and the use of hazardous chemicals.
In the area of workers’ rights, the Moncler Group includes, among its supplier qualification criteria, company audits carried out by qualified professionals. For more information, please refer to Section Three – Consolidated Sustainability Reporting.
RISKS RELATED TO BRAND IMAGE, REPUTATION AND RECOGNITION
The luxury goods sector is influenced by changing consumer tastes, preferences and lifestyles in the various regions in which it operates. The Moncler Group’s success is significantly influenced by the image, reputation and recognition of its brands. If in the future the Group is not able, through its products and initiatives, to maintain the image, reputation and recognition of its brands, sales and economic results may be affected.
The Group therefore constantly strives to maintain and increase the strength of the Moncler and Stone Island brands, with a focus on product quality, innovation, communication and the development of its distribution model according to criteria of selectivity, quality and sustainability, including when it comes to the selection of counterparties with which to operate. The Group integrates sustainability assessments, including those related to compliance with local values (religious, cultural and social) into its communication and marketing strategies, out of a belief that the continuous creation of value for all its stakeholders is a fundamental priority in strengthening its reputation.
RISKS RELATED TO RELATIONS WITH THIRD-PARTY PRODUCERS
The Moncler Group directly manages the development of its collections as well as the purchase or selection of raw materials, whereas for the garment manufacturing phase it relies on both own factories and independent third parties that operate under the Group’s close supervision (façon manufacturers).
Although the Group does not depend to a significant extent on any façon manufacturer, the suspension or termination of a relationship with some of the most significant façon manufacturers could adversely affect the Group’s business, with consequences for its sales and earnings.
The Moncler Group constantly monitors the supply chain of third-party manufacturers in order to ensure, in addition to requirements of high quality and financial reliability, full compliance with labour laws, worker safety and the environment and the principles of its Supplier Code of Ethics and Conduct through audits at third party contractors and their sub-suppliers.
RISKS ASSOCIATED WITH THE RETAIL DISTRIBUTION NETWORK
With the Moncler brand, the Moncler Group generates most of its revenues through the retail channel, consisting of directly operated single-brand stores (DOSs) and the online store, whereas the Stone Island brand has progressively reduced its exposure to the wholesale channel and it now has a balanced exposure between the two channels. Over the years, the Group has demonstrated its ability to open new stores in the most prestigious locations in major world cities and in top-tier department stores, despite the competition between operators in the luxury goods sector to secure such positions, which is very strong.
In addition, by its nature, the retail business has a higher incidence of fixed costs, mainly relating to lease agreements. Although management has demonstrated its ability to develop profitable retail business over the years, a potential slowdown in sales in specific geographical areas could reduce the Group’s ability to turn a profit.
RISKS RELATED TO THE COUNTERFEITING OF BRANDS AND PRODUCTS AND THE PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
The luxury goods market is characterised by the counterfeiting of brands and products. The Moncler Group has made significant investments in the adoption of innovative technologies that enable tracking of products throughout 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 where it operates. However, the presence on the market of significant quantities of counterfeit products could still adversely affect the brand image, with a negative impact on sales and financial performance.
RISKS RELATED TO THE EVOLUTION OF THE REGULATORY FRAMEWORK
The Moncler Group operates in a complex international context and is subject, in the various jurisdictions in which it operates, to laws and regulations that are constantly monitored with regard to the health and safety of workers, environmental protection, rules on the manufacture and composition of products, consumer protection, personal data protection, industrial and intellectual property rights protection, rules on competition and on suppliers management, tax and customs rules, and in general all the relevant regulatory provisions.
The Group operates in accordance with applicable provisions of law and has established processes that ensure knowledge of the specific local regulations in the contexts in which it operates and of the regulatory changes that are gradually made. However, since legislation on certain matters, for example taxation, is characterised by a high degree of complexity, an interpretation other than that applied by the Group may still have a significant impact on economic results. In this regard, the Moncler Group is involved in a programme to negotiate advance pricing agreements with the tax authorities of the main countries in which the Group operates, some finalised and some still in progress.
In addition, the enactment of new legislation or amendments to existing legislation that impose more stringent standards – for example with regard to product compliance – may entail, by way of example, costs of adapting the production methods or characteristics of the products or may limit the Group’s operations, with negative consequences for its financial performance.
RISKS ASSOCIATED WITH EXCHANGE RATE PERFORMANCE
The Moncler Group also operates on international markets in currencies other than the euro, mainly the Chinese Yuan Renminbi, Japanese Yen, US Dollar, Korean Won and British Pound. It is therefore exposed to risk arising from the fluctuation of exchange rates, to an extent equal to the amount of transactions (mainly revenues) not covered by transactions of the opposite sign expressed in the same currency. The Group has a strategy in place aimed at gradually hedging the risks associated with exchange rate trends, limited to “transaction” risks, and has adopted a strict policy on currency risk that sets the minimum hedging limit per currency at the beginning of each sales campaign at 75%, and the minimum hedging limit per currency at the end of the sales campaign at 90%.
However, due in part to “translation” risk – deriving from the conversion into euro of the financial statements of foreign companies expressed in local currency – significant changes in exchange rates may entail changes (positive or negative) in the Group’s results and financial position.
For further information, see the specific section of the Notes to the Financial Statements 9.1.
RISKS ASSOCIATED WITH INTEREST RATE PERFORMANCE
The Group does not avail itself of significant lines of credit as it is fully able to finance its own operations. In addition, the Group has the option of using loans from third parties, specifically banks. If it chose to use such loans, it would be subject to the risk of interest rate changes. In order to hedge part of the risk relating to an increase in rates, the Group may carry out hedging activities. However, any significant fluctuations in interest rates could lead to an increase in financial expenses, with negative consequences for the Group’s results.
For further information, see the specific section of the Notes to Financial Statements 9.1.
CREDIT RISKS
The Moncler Group operates in accordance with credit monitoring policies aimed at reducing the risks arising from the insolvency of its wholesale customers. These policies are based on preliminary analysis of the reliability of customers and on guaranteed forms of insurance cover and/or payment methods. In addition, the Group does not have significant credit concentrations.
However, the emergence of significant delinquency by certain customers could still result in losses on receivables, with negative consequences for the Group’s results. The Moncler Group monitors and manages its exposure to wholesale customers with significant positions with particular care, including by applying for and obtaining bank guarantees and cash deposits in advance of shipments.
For further information, see the specific section of the Notes to the Financial Statements 9.2.
LIQUIDITY RISKS
The Group implements financial planning activities aimed at reducing liquidity risk, including in view of the seasonal nature of the business, particularly for the Moncler brand. Based on evolving financial needs, where necessary, lines of credit are planned with the banking system to meet these needs, according to a corresponding distinction between short-term and long-term lines of credit.
In addition, to face the risk of loss of available capital, the Group follows strict rules to spread its deposits and cash and cash equivalents in a balanced manner over an adequate number of highly rated banks, while avoiding concentration and using only very low free financial products.
For further information, see the specific section of the Notes to the Financial Statements 9.3.
RISKS ASSOCIATED WITH TECHNOLOGICAL INNOVATION
The Moncler Group pays particular attention to the technological innovation of its processes and collections, as well as to the constant improvement of its customers’ experience. In this context, inadequate technological innovation could result in the loss of a competitive advantage over other companies operating in the sector. Conversely, the introduction of new technologies, such as the adoption of artificial intelligence tools, in addition to opportunities, could generate some new risks that the Group should adequately identify and manage.
FOR SOCIAL AND ENVIORNMENTAL RISKS PLEASE REFER TO“DOUBLE MATERIALITY ANALYSIS” OF THE WEBSITE.

Moncler Group has made an analysis of the emerging external risks that are expecting to significantly increase in importance in the long term with a potential impact on the textile sector.

Name: Food Crisis

Category: Geopolitical

Description:
Food insecurity might become a global threat. Economic models projected a shortage of cereals and an increase in cereal price in 2050 due to drivers ranging from increasing geopolitical conflicts and related export bans, to pandemics, uncontrolled demographic growth, economic shocks and climate change.
These contributing causes would impact consumers globally through higher food prices and less availability. Also the World Economic Forum estimates that over 500 Million people could face acute hunger in the next years. In several arable areas of the world this situation might create conditions for a global food shortage that could increase in the future.

Impact:
Farmers that grow staple crops and natural fibers in the future might be encouraged to grow food crops instead of natural fibers such as cotton, linen and hemp because of potential higher incomes due to higher prices and possible government incentives. This could potentially result in a shortage of natural fibers for the apparel industry, in particular cotton. Cotton is a key raw material for the Group and a shortage of cotton could mean either higher cost inputs or potentially unavailability of supply for production.

Mitigation actions:
The Group is increasing its investments in research and development in recycled cotton and alternative raw materials and is also committed to have 50% of its cotton from organic or regenerative agriculture that are more resilient to climate change and can therefore come from areas less suitable for food production.

Name: Impact of AI on Education and Creativity

Category: Societal

Description:

The growing integration of Artificial Intelligence (AI) in the educational system is affecting how younger generations learn and develop creative skills. This phenomenon in the future can represent an emerging risk for a luxury fashion company as the Moncler Group when it comes to hire new generations within the creative department. The primary concern is that reliance on AI might diminish the ability of young individuals to develop and nurture creativity and therefore unique products and creative contents – a critical strategic asset in the luxury fashion industry.

Impact:
In the long term, an homogenization in creativity skills could impact the ability to innovate and maintain the distinctive allure and uniqueness of its products and creative contents. Luxury thrives on originality and the ability to offer designs that captivate and inspire, which require a strong creative component. If emerging talents will be overly reliant on automated tools, this can translate into a lower level of creative power.

Mitigation actions:
To mitigate this emerging risk, a proactive approach is essential. First, the Group has to keep investing in internal training programs that emphasize the importance of creativity and innovation, offering workshops and creative labs to young designers. Collaborations with fashion schools and universities to integrate courses that balance the use of technology with the development of creative skills are crucial. Additionally, above all, promoting a corporate culture that values and rewards originality can encourage employees to explore new ideas and nurture uniqueness. Finally, maintaining continuous monitoring of the evolution of creative skills among the youth will allow the Group to adapt its strategies and stay at the forefront of the industry.

NOTES

^{* Achieving Net Zero involves the overall balance between greenhouse gas (GHG) emissions produced and those absorbed by ecosystems, through neutralisation mechanisms. Specifically, to contribute to Net Zero, companies must reduce emissions and neutralise residual emissions.}

^{**Promoted by CDP, United Nations Global Compact, World Resources Institute (WRI) and World Wide Fund for Nature (WWF), the Science Based Targets initiative establishes and promotes best-practice in defining science-based targets, as well as assessing companies’ objectives.}

^{***Excluding Shop-in-shop.} 

^{**** The term “fur” refers to any skin with hair from animals raised or caught in the wild exclusively or primarily for their fur, for example fox, mink,coyote, finn raccoon, ermine, etc..}