LISI GROUP - Integrated report 2021

LISI – 2021 INTEGRATED REPORT — 65 RISK MANAGEMENT Anappropriate management system — The Group is committed to a convergent risk management process. After conducting a process to identify and inventory risks at production site level, the Group consolidates all the risks to which it is exposed in a matrix that displays the probability of occurrence and the level of severity. The risks are then prioritized. Each significant risk identified is the subject of a periodically reviewed mitigation plan or specific insurance coverage. Risk Mapping Risks related to innovation, competitiveness and competitive positioning • Failure related to new product developments. • Rising competitive pressure. • Risk on the intellectual property of new products offered by the divisions. Quality-related risks • Major quality problems on products manufactured by LISI or sourced from LISI suppliers. Risks related to the industrial footprint • Disruptions related to the relocation of facilities from the Bologne site (Forge 2022 project). Compliance risks • Internal environmental risks: fire, pollution, noise pollution. • Health and safety at work risk. Risks related to procurement and production • Failure of subcontractors or suppliers disrupting production cycles. Pandemic risks • Market shutdown following the health crisis. • Payment difficulties / customer bankruptcy or supplier bankruptcy due to the health crisis. • Difficulties in supplying materials & components and inflation of purchase prices. • Lack of skills in a context of departures and tense labor market. Risks related to market trends • Sharp decline in the automotive market, due in particular to environmental standards in terms of CO 2 emissions, and shortages of material components. • Risk on the order book of customers and/or risk of marginalization after consolidation or reinternalisation phases by customers. Geopolitical, climatic, tax, and currency risks • Sites located in seismic areas, and/or subject to violent climatic events. • Currency and interest rate risks. • Political instability. Risks related to cybercrime Operational Risks External Environment