| Legal and regulatory risks/Intellectual property: trademarks, designs & models, domain names, patents | |
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| Risk identification | Risk management |
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The brands, particularly the 35 major international brands, design, models, domain names and patents filed are strategic intangible assets for the Group. Given the image and reputation of the Group around the world and given the large number of patents (517 in 2021) and trademarks filed by L’Oréal, third parties could:
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Special care is given to the protection of trademarks, designs, model sand domain names belonging to the Group. This responsibility is entrusted to a special unit of the Legal Department. The department ensures the worldwide protection, management and defense of intellectual property rights via searches for prior rights, monitoring of registration and renewal procedures, the implementation of monitoring services and the initiation of appropriate legal action against counterfeiters. In order to protect the Group against the risk of appropriation of a molecule, a formula, packaging, an application system or an application by another company, L’Oréal has set up the International Industrial Property Department, a specific structure which is part of the Research and Innovation Department. It is responsible for filing the Group’s patents, their use and defence on a worldwide basis. It also conducts studies on the free use of Group products with regard to third-party patents and monitors the legality of competitors’ products with regard to the Group’s patents. The L’Oréal Group is also an active member of organisations which have set themselves the goal of combating counterfeiting and promoting best commercial practices. This is the case of the UNIFAB (Union des Fabricants), the APRAM (Association des Praticiens du Droit des Marques et des Modèles) and te AIM (Association des Industries de Marque). |
| Legal and regulatory risks/Product claims | |
|---|---|
| Risk identification | Risk management |
| In its communications, L’Oréal highlights the innovative nature, quality and performance of its products. These communications may be challenged by authorities, organisations or consumers, despite every care used to guarantee their accuracy and fairness. Such actions could affect sales or, more generally, the Group’s financial position, particularly if claims are made or products recalled. | The Worldwide Regulatory & Claims Department controls the conformity of product communications before they are introduced on the market. The Group’s Code of Ethics sets out the fundamental principles of responsible communication and L’Oréal has made a commitment to implement the International Chamber of Commerce Consolidated Code of Advertising and Marketing Communication Practice and the Cosmetics Europe Charter and Guiding Principles on responsible advertising and marketing communication to which the key global cosmetics industry players in Europe adhere. The Group’s principles for “responsible product advertising” are described in a summary brochure disseminated worldwide in order to raise employee awareness about compliance with ethical principles, specific legal and regulatory requirements, and operational processes for the prior control of product communications. |
| Financial and market risks/Currency risk | |
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| Risk identification | Risk management |
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Due to its international presence, L’Oréal is naturally exposed to currency fluctuations. In addition, commercial flows resulting from purchases and sales of items, products, royalties and services arise between subsidiaries in different countries. Procurement by subsidiaries is mainly in the currency of the supplier’s country. Fluctuations between the main currencies may therefore have an impact on the results of the subsidiaries, but also on the Group’s results during the conversion of non-euro subsidiaries’ accounts into euros and, as a result, make it difficult to compare performances between two financial years. The impact of hedging on equity and the analysis of sensitivity to currency fluctuations are detailed in note 11.3. “Other comprehensive income” in the Consolidated Financial Statements. Finally, the impact of foreign exchange gains and losses on the income statement is described in note 10.2. “Foreign exchange gains and losses” of the Consolidated Financial Statements. |
The Financial Charter and the currency risk management standard specify, in particular, the principles to be applied by Group entities to ensure that management of currency risk is both prudent and centralised. To limit currency risk, the Group adopts a conservative approach, whereby it hedges a significant portion of its annual requirements for the following year through currency forward contracts (purchases or sales) or through options. Hedging requirements are established for the following year on the basis of operating budgets of each subsidiary. These requirements are then reviewed regularly throughout the year in progress. In order to obtain better visibility over the flows generated, currency risk management is centralised through the Treasury Department at head office (Group Corporate Finance Department), which uses a specific tool for centralising the subsidiaries’ requirements by currency (FX report). The system of foreign exchange risk hedging is presented to the Audit Committee. The hedging methodology and the equities involved are described in note 10.1. “Hedging of currency risk” of the Consolidated Financial Statements. |
