Get Adobe Flash player 3Corporate governance REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS 3.2.2. INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES

3.2.2.1. Internal control objectives oftheparent company

The Group applies the internationally recognized definition of internal control formulated by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to this definition, internal control is a process, effected by an unit’s Board of Directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

a effectiveness and efficiency of operations;

a reliability of financial reporting;

a compliance with applicable laws and regulations.

This definition complies with that set out in the Reference Framework for Risk Management and Internal Control Systems issued by the AMF, which states:

“Internal control is a company’s system, defined and implemented under its responsibility, which aims to ensure that:

a laws and regulations are complied with;

a the instructions and directional guidelines fixed by Executive Management or the Management Board are applied;

a the Company’s internal processes are functioning correctly, particularly those implicating the security of its assets;

a financial reporting is reliable;

and generally, contributes to the control over its activities, to the efficiency of its operations and to the efficient utilization of its resources.”

By helping to anticipate and control the risks involved in not meeting the objectives the Company has set for itself, the internal control system plays a key role in conducting and monitoring its various activities.

However, internal control cannot provide an absolute guarantee that the Company’s objectives will be met .

One of the objectives of the internal control system is therefore to anticipate and control the risks arising in the course of the Company’s business, as well as the risk of errors or fraud, particularly in the areas of accounting and finance. However, as stated in the AMF’s Reference Framework, internal control procedures cannot provide an absolute guarantee that the Company’s objectives will be achieved, no matter how well the system is designed or how well the procedures are applied.

The following description of the Company’s internal control and risk management systems was prepared based on the aforementioned Reference Framework and its application guide.

3.2.2.2. Summary description of internal control and risk management procedures

The internal control and risk management procedures described below cover the parent company and all of its consolidated subsidiaries. Whenever a new entity is consolidated, it implements a systematic plan to deploy the internal control procedures and it is included in the audit plan on a priority basis.

Overall organization of the internal control andrisk management systems

Main participants

Internal control and risk management procedures are part of the policies defined by the Board of Directors and are implemented under the direct responsibility of the heads of the operating divisions and corporate functions. Internal control and risk management are everyone’s responsibility, from executive officers to front-line employees.

In this regard, the main structures responsible for overseeing the internal control and risk management systems are as follows:

Executive Management

In accordance with the law and the Company’s Bylaws, the Chairman and Chief Executive Officer represents the Company in its dealings with third parties and has the broadest powers to act on behalf of the Company in all circumstances. The situations where exercise of the Chairman and Chief Executive Officer’s powers is subject to the prior approval of the Board of Directors are detailed in paragraph3.2.1 of this report.

For the purpose of carrying out his duties, the Chairman and Chief Executive Officer has set up an Executive Committee, including representatives from all of the operating divisions and corporate functions. In 2012, the Committee comprised the following members:

a the President and Chief Operating Officer, responsible for Worldwide Operations;

a the Global Chief Marketing Officer, responsible for Brand Strategy, Design Strategy, Marketing and Distribution;

a the Global Chief Human Resources Officer, also responsible

for Group Organization, Transformation and Sustainable

Development;

a the Global Chief Operations Support Officer, in charge of

Development, Franchising, Procurement, Technical Services

and Design Management;