Risk management Risk management system 03 3.1 RISK MANAGEMENT SYSTEM In today’s constantly evolving environment, the ability to foresee, manage and track risks is a core component in Michelin’s corporate strategy. The Group's geographic footprint, its position as the world’s leading manufacturer of life-changing composites and experiences, and the diversity of its business base all mean that it is exposed to a variety of risks, both endogenous and exogenous. Strategic, financial, industrial, commercial, environmental and people-related risks have been clearly identified and are being managed in ways that minimize their occurrence and impact. The crisis management process and the full range of prevention and protection measures have been put to the test in recent years, confirming the Group’s confidence in its ability to deal with multiple crises on an ongoing basis. To support the disciplined management of its risks and impacts, the Group has deployed a holistic, cross-functional management system that complies with the most exacting international professional standards, such as those of the Committee of Sponsoring Organizations (COSO) and the reference framework of the European Securities Market Regulator (ESMA) and the French securities regulator (AMF). The Group's system is continuously upgraded to reflect the latest regulatory changes and risk management best practices. Definitions and method For Michelin, risks or impacts correspond to the possible occurrence of an event whose consequences could affect either: n its ability to meet its objectives, its financial situation or its reputation (risks); n or its stakeholders, i.e., events or practices that could have an impact on people, the planet or society (impacts). Note that certain Impacts may also boomerang and, in return, create a risk for the Group. The Group manages and assesses 250 risks and impacts, organized into 14 families, that reflect both stakeholder expectations and the risks deemed critical to the Group and its sustainability. Risks and impacts are assessed on both a gross and a net basis. The gross or inherent effect of risks and impacts is measured using worst-case risk/impact scenarios. The net or residual effect is equal to: n the gross or inherent effect; n less the impact of management levers, i.e., all the risk and impact mitigation measures deployed by the Group, including prevention, protection, mitigation, crisis management, risk transfer, and risk/impact governance systems. Management levers are regularly audited and assessed by the Internal Audit Department. Gross and net risk/impact assessments are based on two impact scales: n a financial and reputational impact scale for risks; n an accountability scale for environmental, human, social and governance Impacts. Accountability, as defined in the ISO 26000 standard, means that an organization must be answerable for its impacts on stakeholders. The divisions on the accountability scale are determined by the amount of impact and the organization’s degree of influence on the impacted ecosystem. Governance Each risk/impact family is managed by a cross-functional Governance Committee comprising the Chief Executive of the business unit concerned and chaired or co-chaired by a member of the Group Executive Committee or Management Committee. These committees are tasked with defining their family’s risk management policies, vetting its risk/impact map, and prioritizing or deciding on initiatives to address the related risks and impacts. Each one is responsible for delivering the risk/impact management targets defined in its policies. Lastly, each is supported by an Operational Committee responsible for tracking the definition and implementation of risk/impact management action plans. The risk/impact management process encompasses a holistic set of resources, procedures and initiatives aligned with the characteristics of each of the Group's businesses, which together help to maintain net risk effects at tolerable levels and net impact effects in line with accountability targets. The main components of this process are presented in detail below. 156 2024 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN
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