MENU You are here HOME / Investors / Archive / RISK MANAGEMENT POLICY X THIS WEBSITE OR THIRD-PARTY TOOLS USED BY THE SITE ITSELF USE THE COOKIES NECESSARY FOR OPERATION AND USEFUL FOR THE OBJECTIVES ILLUSTRATED IN THE COOKIE POLICY, INCLUDING THE POSSIBILITY OF SENDING YOU ADVERTISEMENTS ACCORDING TO YOUR INTERESTS. IF YOU WANT TO KNOW MORE OR REFUSE CONSENT TO ALL OR SOME OF THE COOKIES, CONSULT THE COOKIE POLICY. BY CLOSING THIS BANNER, SCROLLING THIS PAGE, CLICKING ON A LINK OR CONTINUING BROWSING IN ANY OTHER WAY, YOU WILL AGREE TO USE OF THE COOKIES. ACCEPT COOKIES RISK MANAGEMENT POLICY SEE ALSO RISK MANAGEMENT Risk is an integral part of doing business and can be defined as any uncertain event that could threaten the achievement of business objectives and strategies or the Group’s tangible and intangible assets. For this reason the integrated risk management process (“Enterprise Risk Management” or “ERM”) is designed to: Protect value Increase opportunities Create a “risk and rewards” framework for strategies and business decisions. Within this context, the Group’s Risk Management department’s mission is to support the organization to: Manage risks in terms of prevention and mitigation Proactively seize opportunities Disseminate a “culture” of risk evaluation across Group decision making processes, in particular, in the strategic planning process and significant business decisions Ensure that Group Risk Exposure is consistent with the Group Board of Director’s risk appetite and does not exceed Group Risk Capacity, in order to achieve long-term sustainable performance Assure transparency of Luxottica’s risk profile and risk management strategies with a focus on top managers and the Board of Directors along with adequate information provided to the shareholders and other relevant stakeholders. In order to achieve these objectives, the Risk Management department is committed to promoting a proactive, structured and coordinated approach to identify, prioritize, manage and monitor relevant risks that could have an impact on the Group’s future business growth and the value of tangible and intangible Group assets. Identification of risks during the ERM process does not mean the identified risk will definitively occur, but only that such risk is a possibility. Risk Management activities are based, because of their nature, on future and uncertain events. Luxottica’s objective is to be risk aware, in conducting its business and allowing for informed decision making when actively managing events that could potentially have a negative effect on: Current and future cash flow and profitability Strategic business objectives Tangible and intangible assets. Luxottica is risk adverse towards events that could: Negatively affect the safety or well-being of employees, consumers and other stakeholders Lead to breaches of local laws or regulations Endanger the environment Negatively affect the Group’s reputation. In line with the Group’s corporate governance practices, the Board of Directors has a key role in the “governance” of the risk management process. The Board, acting upon the recommendation of the Control and Risk Committee, is responsible for the definition of risk management system guidelines in order to identify, measure, manage and monitor the principal risks impacting the Company and its subsidiaries and defining risk levels that are compatible with the strategic objectives of the Company. ROLE & RESPONSIBILITIES The Risk Management department works as a facilitator and coordinator of the activities described above. In particular, it: READ ALL Risk owners are the parties ultimately responsible for risk identification and management. Risk owners obtain the benefits and are responsible for the consequences of their respective decisions and are best positioned to understand the inherent risks of their day-to-day activities. Risk owners must be aware of the risk / reward balance of decisions, seeking guidance from the RM department when necessary to make an informed decision. In particular Risk owners: READ ALL Luxottica’s legal department: READ ALL Internal Audit department / Compliance office: READ ALL Luxottica’s ERM Process is composed of five phases and represents a reference model for all business decisions. The universe of risks potentially applicable to Luxottica has been split into three risk categories listed below. EXTERNAL RISKS STRATEGIC RISKS OPERATIONAL RISKS External factors, which are completely beyond the control of the Group, have a negative effect on Group business and assests. Characteristic of the eyewear industry and/or strictly driven by Luxottica strategic decisions; could lead to being a competitive advantage or, alternatively, the basis of a failure to achieve strategic targets. Generated by ineffective organizational structure, internal processes and systems, and assuming these risks do not produce any competitive advantages. «Inevitables» «Strategic objectives» driven «Company genetic profile» MONITOR Measure Group resilience AWARE Balance risk-return profile AVOID No competitive advantage External risks are completely beyond the control of the Group and have a negative effect on the Group’s business and assets (e.g., risks deriving from macroeconomic factors, competitors, customer requirements, future laws and regulations etc.). The risk management objective is to monitor these risks, measure the Group’s resilience (stress test) and strive to mitigate the impact in case the risk occurs. Strategic risks are characteristic of the eyewear industry and/or strictly driven by Luxottica’s strategic decisions (e.g. risks related to Image & Branding, license agreements, mergers & acquisitions etc.). In this case the objective is to create awareness during the decision-making process. Finally, operational and compliance risks include risks generated by an ineffective organizational structure, internal processes and systems (e.g. risks related to Information Technology, Asset Protection, Business Interruption, Legal and Compliance etc. ) The risk management objective is to strive to mitigate such risks through the continuous improvement of the Group’s internal control system. EXTERNAL RISKS STRATEGIC RISKS OPERATIONAL RISKS RISK MANAGEMENT OBJECTIVES Monitor Measure Group resilience Mitigate the impact in case the risk occurs Create awareness during the decision making process Have a risk-reward analysis Consider the cost for risk mitigation and the impact of risk on economic/financial target Reduce risks impact/probability through: Continuous improvement of internal control systems Adequate allocation of resources in strategic plan / budget «CONTROL MODEL» Adoption of (i) internal/external tools to promptly identify and monitor these risks; (ii) stress test/ business case/ scenario analysis to assess the robustness of the plans/strategies and/or the Group’s capacity to face these risks. Decision making process/reporting tools that facilitate risk identification and discussion and, if possible : The quantification of impact on expected results/target The «cost» of risk mitigation The control model is based on the development of ad hoc methods to identify processes/systems and organizational vulnerabilities in order to set detailed mitigation plans. RISK DEPARTMENT ROLE RM Dept role is (i) to complement strategy/business development team in running stress tests /what if analyses on alternative scenarios and (ii) to prepare Contingency plan to react in case the risk occurs. RM Dept role is to complement strategy/ business development team to facilitate the risk identification, evaluation and monitoring. RM Dept act as an independent overseer on risk assessment and mitigation plans monitoring. 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