2 _55 2023 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN 2 RISK MANAGEMENT Risk factors specific to Michelin, description and related management systems As part of a continuous improvement process, the Group has also defined a methodology to address double materiality factors, in line with its All Sustainable vision, which focuses on the value created by the Group in the three areas of People, Profit and Planet. To this end, what were referred to as risks in 2022 have been broken down this year into two categories: ● “Risks", when they could have potential repercussions on the Group; ● “Impacts”, when they could have potential repercussions on the Group’s ecosystems. Note that certain Impacts may also boomerang and, in return, create a risk for the Group. This is the case for the Impacts selected below. Risks and Impacts are measured according to two impact scales: ● a financial, reputational and human impact scale for Risks; ● an accountability scale for environmental, 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. In accordance with the requirements of Regulation (EU) 2017/ 1129, Article 16, the selected risk and impact factors are those that have been demonstrated to be specific to Michelin and that have a significant net effect on the Group. The net or residual effect is equal to: ● the gross effect; ● less all the risk and impact mitigation measures deployed by the Group, including prevention, protection, crisis management, risk transfer, and risk and impact governance systems. On this basis, 12 risk and impact factors were identified as being specific to and having the greatest net impact on the Group. With regards to the impact factors, note that they were selected above all on the basis of their net effect on the Group. Note as well that two of these factors (product safety and environmental transition risks) correspond to issues identified as critical in the materiality analysis (see the materiality matrix presented above). The 12 risk and impact factors are presented in the following table. 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: ● “High” = more than €450 million in annual net effect ● “Medium” = between €150 million and €450 million in annual net effect ● “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 Medium to high 6 – Mergers and acquisitions Medium 8 – MICHELIN brands and reputation Low to medium 10 – Lack of employer attractiveness/employee retention Low Risks and Impacts related to Michelin’s Operations and Business 1 – Physical effects of climate change High 2 – Supply chain Medium to high 4 – Manufacturing business interruption Medium 5 – Cyber attack Medium 7 – Environmental effects of our products Medium 11 – Knowledge retention Low 12 – Product safety Low Financial risks 9 – Pension and other defined benefit plans Low to medium NB: risks are numbered based on their residual effect from highest to lowest.
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