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ENTERPRISE RISK MANAGEMENT MODEL

The Group has an integrated Enterprise Risk Management (ERM) model inspired by international best practices, involving the entire organisation and governance bodies, each within its sphere of competence. According to the field’s guidelines and best practices, the main objective of ERM activities is to ensure optimal identification, measurement, management and monitoring of company risks.

The ERM model considers the main types of risk that may compromise the achievement of strategic objectives, harm the company’s assets and compromise the value of the Moncler and Stone Island brands or the companies’ reputation. It is integrated in, and functional to, the relevant decision-making processes.

The risks identified may be internal or external to the Group. In particular, external risks are linked to the industry and market context, as well as to the perception of all stakeholders of how the Group operates. The enterprise risk management model classifies risks into four categories:

 

• Strategic Risk

• Business Risk

• Compliance Risk

• Financial Risk.

 

Strategic risks may refer to changes in the business or the inadequate response to changes in the competitive environment and the Company’s business development activities. Sustainability risks may also be included in this category.

 

Business risks are those related to the sector in which the Group operates, the business operations, its organisational structure, information systems and Group’s control and reporting processes.

 

Compliance risks, in general, are those related to non-compliance, in the conduct of the business, with national and international laws and regulations applicable to the business activity, as well as to the Code of Ethics and internal procedures.

 

Financial risks are those related to the Group’s financial management, specifically related to the risk of: liquidity, exchange rates, interest rates and financial counterparties in financial and commercial transactions.

 

In the case of internal risks, the aim of the ERM model is to manage risk through specific prevention and control systems integrated into the corporate processes, aimed at avoiding or transferring the risk, at reducing the probability of occurrence or, in the event of occurrence, containing its impact. In the case of external risks, the aim of the ERM model is to monitor risks and mitigate the impact if such risks occur, for example through insurance policies.

The risk assessment activity identifies all risks and risk owners responsible for managing the risk and the corresponding control system, as well as for implementing or improving the mitigation actions. The risks, the assessment of the internal control system covering them and the related mitigation actions are included in the Risk Register, which is periodically updated with the risk owners on the basis of an annual plan approved by the Board of Directors with the support of the Control, Risks and Sustainability Committee. The proposed plan is periodically updated to include any new elements of risk and/or to reflect a possible increase in the probability of occurrence or in the impact.

In 2021 a project was launched to update the methodology underlying the ERM model; it will be finalised in the first months of 2022. The project is designed to ensure a better alignment of the risk portfolio with the Strategic Plan, an update of the assessment scale for the risk appetite, alongside with the introduction of a quantitative multi-scenario methodology to measure the main risks reported.

In addition, during the year the ERM model was integrated with climate change risks, consistently with the recommendations of the Financial Stability Board ‘s Task Force on Climate-related Financial Disclosures (TCFD).