MONCLER ANNUAL REPORT AT 31 DECEMBER 2020BOARD OF DIRECTORS REPORT 5756

The most important business risks are 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 RELATED TO THE COVID-19 PANDEMIC

The spread of the coronavirus is a complex and unprecedented global emergency in the modern world, with health, social, political, economic and geopolitical implications. Moncler's task force, set up to face the emergency, supported the Group s senior management in defining a strategy aimed primarily at safeguarding the health of its employees, protecting the business and focusing on strategic objectives, also through the update of its three-year strategic plan. Among these, the strengthening of the digitisation process and the implementation of a full omnicanality are fundamental. However, it cannot be excluded that the persistence of the emergency situation, together with the uncertainty of its evolution, may negatively affect the results of the future years.

RISKS ASSOCIATED WITH THE MARKET IN WHICH THE GROUP OPERATES AND WITH GENERAL ECONOMIC CONDITIONS

Moncler operates in the luxury goods sector, which is characterised by a high correlation between the demand of goods and the trend in wealth, economic growth and political 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 of the business in specific geographical areas, the possible deterioration of economic, social and political conditions in one or more markets in which it operates may have a negative impact on sales and financial results of the Group. The introduction by national or supranational bodies of restrictions on the movement of people between different countries as a consequence, for example, of international crises or pandemics can have an impact on revenues, especially in relation to certain geographical areas in which Moncler operates.

In particular, important international consulting firms estimate that over a third of the world s luxury goods con-

MAIN RISKS

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.

sumers are Chinese, representing the most important con- sumer cluster for the sector today; therefore, it cannot be excluded that a significant slowdown in the Chinese economy or travel restriction from China could have negative effects on the performance of Moncler.

RISKS ASSOCIATED WITH BRAND IMAGE, PERCEPTION AND RECOGNITION

The luxury goods sector in which Moncler operates is influ- enced 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 constantly focuses on maintaining and enhancing 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, also in the choice of the partners. Moncler integrates sustain- ability assessments, while all values (religious, cultural and social), in its communication and marketing decisions, since the Company believes that the continue creation of value for its stakeholders is an essential priority for its reputation.

If 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.

RISK ASSOCIATED WITH KEY MANAGEMENT PERSONNEL

Moncler s results and success depend significantly on the ability of its executive directors and other members of the management team, 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.

This risk is mitigated through the definition of a succession plan and the adoption of retention plans for key professional figures.

RISKS RELATED TO COST AND AVAILABILITY OF HIGH-QUALITY RAW MATERIALS, TO CONTROL OF THE SUPPLY CHAIN AND TO RELATIONSHIPS WITH SUPPLIERS

Moncler s products require raw materials of high quality, including, but not limited to, nylon, down and cotton. The price and availability 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.

In order to minimise the risks related to a potential unavailability of raw materials in the time required by production, Moncler adopts a multi-sourcing strategy of diversifying suppliers and purchase plans with a medium- term time horizon. Furthermore, these raw material suppliers are contractually required to abide by clear commitments to quality and compliance with current legislation on worker protection and on local labour law regulations, animal and environmental protection and usage of hazardous chemicals.

With reference to workers rights, Moncler includes, among the suppliers qualification criteria, the passing of social audits carried out by qualified professionals. With regards to animal welfare, Moncler created a multi-stakeholder forum, which approved and constantly monitors and integrates 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 throughout the supply chain. With regards to hazardous chemicals, Moncler requires its suppliers to operate in full compliance with the most restrictive international legislation applicable to hazardous or potentially dangerous chemicals, including the European REACH12 regulation, the Chinese GB13 standards, the Japanese JIS14 standards.

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 independent third-party manufacturers (façon manufacturers), who operate under the close supervi- sion 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 third-party manufacturers in order to ensure there is full compliance, in addition to the highest quality requirements,

12. Registration, Evaluation, Authorisation and restriction of Chemicals. 13. National Standard of the People s Republic of China. 14. Japanese Industrial Standards.