Risk management Risk factors specific to Michelin, description and related management systems 03 3.2 RISK FACTORS SPECIFIC TO MICHELIN, DESCRIPTION AND RELATED MANAGEMENT SYSTEMS In accordance with the requirements of Regulation (EU) 2017/ 1129, Article 16, the following twelve risk and impact factors have been identified as being specific to and having the greatest net impact on the Group. Due to the guidance issued by ESMA and the AMF on the risk factors to be discussed pursuant to the European prospectus regulation, only the main risk and impact factors identified by the Group are discussed in this chapter. Other non-specific financial and non-financial risks and impacts are discussed in Chapters 4 and 5, below. The following twelve risk and impact factors are aggregates of the risks and impacts tracked in the Group's portfolio. They are presented: 1. by category; 2. ranked from the highest to the lowest net effect. Financial risks are ranked on the basis of their potential financial effects on annual consolidated operating income, as follows: l “High” = more than €450 million in annual net effect l “Medium” = between €150 million and €450 million in annual net effect l “Low” = less than €150 million in annual net effect Risk and impact categories Risk and impact factors Net impact Risks and Impacts related to Michelin’s strategy, organization and governance 3 - Environmental transition risks and environmental impacts from our operations High* 8 – Mergers and acquisitions Medium 9 – Lack of employer attractiveness/employee retention Low to medium 10 – MICHELIN brands and reputation Low to medium Risks and impacts related to Michelin’s operations 1 – Physical effects of climate change High* 2 – Supply chain High 4 – Manufacturing business interruption Medium 5 – Cyber attack Medium 6 – Knowledge retention Medium 7 – Environmental impacts from the use of our products Medium 12 – Tire product safety Low Financial risks 11 – Pension and other defined benefit plans Low to medium * Projected medium- to long-term consequences. NB: risks are numbered based on their residual effect, from highest to lowest. All the identified risks and impacts are specific to Michelin and have a low probability of occurring, with the exception of the risk of the physical effects of climate change, which is non-specific and certain to occur. Note, however, that managing this risk includes measures dedicated to climate change adaptation, which are specific to the Group and its geographical locations. Risk 1 – Physical effects of climate change Risk factors As a global industrial player, the Michelin Group has significant interactions with the natural environment throughout the life cycle of its products and services. These risks expose it to physical risks related to climate change, i.e., to both acute and chronic risks as defined by the Task Force on Climate-Related Financial Disclosures (TCFD). Specific nature of the risk The global footprint of the Michelin Group’s production base and supply chain exposes it to the effects of climate change, which may, however, vary in degree, variety and duration depending on the geographic location. In light of the diverse range of suppliers and the many interdependent factors necessarily involved in the manufacture of its products (infrastructure, energy, availability of labor, transportation systems, etc.), the effects of climate change may be qualified as systemic. This means that they include external events that are not taken into account in the supply chain or manufacturing business interruption risks already addressed elsewhere (see risks 2 and 4). Such effects could become systemic, for example, if employees are unable to reach their workplace due to floods, heat waves or other extreme climate events; if major infrastructure, such as production facilities, roads, ports and power, gas and co-generation grids, becomes unusable, or if demand suddenly collapses. In addition, the Group is the world's largest purchaser of natural rubber and aims to increase the proportion of sustainable materials in its tires. This increases the need for bio-based products that are 160 2024 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN
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