LISI GROUP - Integrated report 2022

RESPONDING TO GOVERNANCE ISSUES RISK MANAGEMENT 78 LISI – 2022 INTEGRATED REPORT OPERATIONAL RISKS Risk factors URD 2022 risk details Residual criticality* Financial exposure Trend versus 2021 Mitigation measures Procurement, Production Failure of subcontractors (heat treatment, machining, sterilization) or suppliers (raw materials, components) disrupting our production cycles. ++ €[8‑10]M Financial and non-financial evaluation of suppliers. Reinforcement of supplier audits. Internalization studies of certain processes. Search for alternative solutions. Asymmetric inflation Risk of not passing through the increases in costs incurred (materials, services, energy, payroll costs, etc.). Risk of commercial tensions linked to the passing through of these increases, which could deteriorate operational performance (in the event of refusal of passing through), relations with customers or the ability to win new contracts. ++ €[25‑50]M New Partnerships with customers (long-term contracts with passing through clauses for increases incurred). Development of insourcing and/or new suppliers. Co-development with suppliers. Industrial plans for savings, optimization and relocation. Social tensions and increased payroll costs degrading performance. ++ €[5‑10]M New Work on making the production tool more flexible. Industrial plans for savings, optimization and relocation. Development of robotization. Innovation, Competitiveness, Competitive positioning Innovation, Competitiveness, Competitive positioning ++ €[10‑15]M Internal productivity plans and development of inter-site synergies. Excellence on Price Quality‑Deadlines. Industrial innovation plans. Technology watch, R&D proximity to customers. Industrial means automation plans. Digitization of Support functions. Training and attractiveness plans / Partnerships with schools / Apprenticeship development. Integration plans for new progressive and co-constructed sites. Lack of new customer programs and continued strong pressure on the prices of existing programs. Entry of new competitors or consolidation of customers in certain geographical areas. Lack of key skills. Failed negotiations with major customers. Failures to adapt to market changes, in terms of positioning and/or obsolescence of means of production. Failed new products. ++ €[3‑5]M Integration, upstream (demonstrators). Close contact with customers. Risk on the intellectual property of new products offered. ++ €[3‑5]M Legal protection policy for innovations and manufacturing processes. Technological and competitive monitoring. Quality Major quality problems on products manufactured by LISI or from LISI suppliers. ++ €[5‑7]M Strengthening of Quality control processes. Process audits of critical suppliers. Improved operational control with the “0 escape” project. Adequate crisis management procedures. Industrial footprint Disruptions related to the relocation of facilities for the Bologne site (Forge 2022 project). ++ €[3‑4]M Conduct of the Forge 2022 plan: Transfer plan. Specific site attractiveness plan. Recruitment of specific skills in the face of increased production rates. Compliance Internal environmental risks: fires, pollution, noise pollution. + €[3‑4]M Risk prevention, capital expenditures, and monitoring plans. Site audits carried out with insurers. Negotiations with stakeholders to reduce nuisances (noise, vibrations, etc.). Occupational health and safety risk (industrial accident or/and occupational disease, machine non-compliance). ++ €[1‑3]M NC1 convergence plan. Risk identification and communication plans, training plans. * Residual criticality: impact of the risk amended by its probability, control on the probability of occurrence, the level of control. (Levels: + : Low; ++ : Moderate; +++ : High; ++++ : Major).