65 bOaRD OF DIREcTORS REPORT64 MONCLER GROUP 2022bOaRD OF DIREcTORS REPORT

ic geographical areas. In particular, in recent years the importance of asian markets for the luxury goods sector has increased, reach- ing around half of turnover for the Moncler brand at the end of 2022, whereas Stone Island, having only recently begun its international expansion, particularly in asia and america, remains more exposed to the European market (69% of revenues in fiscal year 2022).

cYbER RISKS aND PERSONaL DaTa PROTEcTION RISKS Following a sophisticated malware attack in December 2021, which had no significant effects on the business but resulted in the exfiltration of personal information, the Group started a process of strengthening cybersecurity measures and technical expertise in this area, which during 2022 significantly increased the level of pro- tection from this type of attack.

However, the Group s rapid technological evolution and in- creasing organisational complexity, together with the increasing sophistication and frequency of cyber attacks, mean it is not pos- sible to exclude the potential risk for the Group of cyber attacks us- ing innovative attack techniques.

Moncler is investing significantly in its model for managing cyber risks with a view to business continuity, adopting the best technologies and methodologies for identifying and protecting the Group, along with procedures, staff training, and careful assessment and periodic review of risks, including with regard to third parties.

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 sup- ply side could lead to difficulties in supply and a further increase in costs, with negative consequences for the Group s economic re- sults. In order to minimise the risks associated with the potential unavailability of raw materials in the timescales required for produc- tion, Moncler adopts a multi-sourcing strategy for supplier diversi- fication and plans purchases with a medium-term time horizon. In addition, suppliers of raw materials must meet precise contractu- al quality, composition and performance requirements and comply with applicable laws on worker protection, working conditions, lo- cal labour laws, respect for animal welfare, the environment and the use of hazardous chemicals.

In the labour rights, the Moncler Group includes, among its supplier qualification criteria, company audits carried out by quali- fied professionals.

With regard to respect for animals, the Moncler brand formed a multi-stakeholder forum that approved and continuously monitors and integrates the DIST (Down Integrity System & Traceability) pro- tocol, to which suppliers must adhere strictly, ensuring the trace- ability of the raw material, respect for animals and the finest quality throughout the supply chain. With regards to hazardous chemicals, the Group requires its suppliers to operate in absolute compliance with the most restrictive international laws applicable to hazardous or potentially hazardous chemicals, including the European REacH regulation, chinese Gb standards, Japanese JIS standards, as well as with the Product Restricted Substance List (PRSL) and the cor- porate Manufacturing Restricted Substances List (MRSL), which include not only legal parameters, but also many more restrictive voluntary requirements, in line with a precautionary approach.

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 fu- ture 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 coun- terparties with which to operate. The Group integrates sustainabil- ity 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 strengthen- ing its reputation.

RISKS RELaTED TO RELaTIONS WITH THIRD-PaRTY PRODUcERS The Moncler Group directly manages the development of its collec- tions as well as the purchase or selection of raw materials, whereas for the garment packaging phase it relies on both own factories and independent third parties that operate under the Group s close su- pervision (façon manufacturers).

although the Group does not depend to a significant extent on any façon manufacturer, the suspension or termination of a re- lationship 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 require- ments 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. However, there is still a risk that a counterparty will not fully comply with the contracts en- tered into with Moncler in terms of quality, timeliness of deliveries and compliance with the applicable regulations.

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 operat- ed single-brand stores (DOSs) and the online store, whereas the Stone Island brand is more exposed to the wholesale channel (63% of 2022 revenues). 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 compe- tition between operators in the luxury goods sector to secure such positions, which is very strong. The Group thus may encounter dif- ficulties in opening new stores in the future, with negative conse- quences for its business growth prospects.

In addition, by its nature, the retail business has a higher inci- dence of fixed costs, mainly relating to lease agreements. although management has demonstrated its ability to develop profitable re- tail business over the years, a potential slowdown in sales in specific geographical areas could reduce the Group s ability to turn a profit.

ENVIRONMENTaL RISKS Environmental issues and the related risks are also subject to as- sessment and formulation of mitigation plans.

With reference to the environmental risks linked to climate change, in 2021 the Group began voluntarily reporting company risks related to climate change in both its Non-Financial Statement and the cDP climate change Questionnaire, as required by the Eu- ropean Securities and Market authority (ESMa) and the recommen- dations of the Task Force on climate-related Financial Disclosures (TcFD) of the Financial Stability board: Governance, Strategy, Risk Management, Metrics and Targets.

The potential and actual risks analysed concern the intensi- fication of extreme climatic phenomena, the increase in the cost of certain types of raw materials, the introduction of regulations aimed at containing climate change and possible changes in customer purchasing habits.

In addition to the risks associated with climate change, the Group also identifies among environmental risks the failure to com- ply or incomplete compliance with relevant rules and laws which could result in possible criminal penalties and/or financial outlays; environmental pollution phenomena related, for example, to uncon-