2 _57 2023 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN 2 RISK MANAGEMENT Risk factors specific to Michelin, description and related management systems Risk 2 – Supply chain Risk factors Every year, Michelin purchases some €15 billion worth of goods and services from around 50,000 different suppliers. These purchases may be broken down into three families: ● raw materials; ● production inputs; ● business services. The Group is exposed to a certain number of supply chainrelated risk factors: ● geopolitical tensions; ● disruptions to raw materials and energy supply chains; ● imbalances between supply and demand; ● shortages of certain components; ● certain regulatory requirements; ● supplier failure or closure. Specific nature of the risk A tire contains around 200 different products and components, some of which are highly specific, and their continuous availability is critical to production. The risk of supplies being interrupted is particularly acute for Michelin, whose products are highly technical and whose customers expect them to perform to consistently high standards throughout their useful lives. This is why Group procedures ban any substitute supplies unless the impact on finished product performance has been tested. Governance and risk management response The governance body tasked with managing supply chain risk is the Materials Steering Committee, which is co-chaired by the Executive Vice President, Manufacturing and the Executive Vice President, Research & Development, who are both members of the Group Executive Committee. Its meetings are also attended by representatives of the Purchasing Department. To more effectively anticipate and prevent supply continuity risks, procedures and measures have been introduced to manage purchasing across the Group at the most pertinent level, i.e., local, regional or global. These include raising employees awareness of supply continuity risks, conducting audits of critical suppliers' business continuity plans, signing multi-year contracts with the main suppliers, looking for new suppliers, maintaining strategic buffer inventory for critical products and seeking substitute products when certain commodities become scarce. Risk 3 – Environmental transition risks Risk factors This risk concerns the possible repercussions for the Group if the environmental transition is inadequately managed, including the policy and legal, technology, market and reputational aspects defined in the Task Force on Climate Related Financial Disclosures (TCFD) nomenclature. It also covers certain environmental impacts, such as pollution, resource depletion and the loss of biodiversity. Concerning this last issue, please refer to Chapter 4, section 4.1.1.3 Supporting biodiversity. Specific nature of the risk Mobility, which is the Group’s main market, is a sector that has a significant impact on the environment and climate change. As a result, it is heavily regulated at both local and international levels, and is also shaped by the continuous fast pace of technical and social change. Recognizing the high expectations of stakeholders and the Group's leadership position, Michelin is firmly committed to protecting the environment. Environmental transition risks could arise, in particular, from: ● the failure or inability to comply with environmental regulations; ● failure to prepare for scientific and social changes; ● non-compliance with the Group’s environmental commitments; ● third-party challenges to the Group on environmental issues. Governance and risk management response A governance structure is in place to address this risk factor – the Environmental Governance body (see Risk 1). The main levers already in place for managing these risks may be summarized as follows: ● a global environmental policy has been defined and implemented, certain aspects of which have been shared with the third-party organization (see Chapter 4 and the Duty of Care Plan); ● stakeholder issues, as discussed at meetings of the Stakeholders Committee and reflected in updates to the materiality matrix, have been taken into account in the policy; ● a structured regulatory watch and internal control system have been deployed to provide assurance that current and emerging regulations are identified and applied; ● policy deployment, including in new business operations, and progress towards its targets are being managed using appropriate indicators reviewed by the Environmental Governance body; ● long-term technological and social changes are addressed through the foresight projects carried out by the Group; ● a continuous and structured process of contact with external stakeholders (NGOs, Customers, Suppliers, Investors) exists through the Stakeholder Committee and the systematic consideration of issues or controversies facing the Group.
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