2024 universal registration document

3. Risk factors and management

Business risks/Health crisis  Significant
Risk identification Risk management

Because of its worldwide presence, L’Oréal is exposed to epidemics or other public health crises in the 77 countries in which it operates.

The main risks identified cover different segments of the Group’s business activities:

  • impairment of the health, safety and security of employees in the context of their duties and their business travel, and lockdown of the population that prevents employees from entering their work site, particularly at the manufacturing and distribution sites;
  • difficulties for the company to operate normally because of restrictive measures put in place by the authorities, which restrict employee access to the Group’s sites, or as a result of the unavailability of individual protective equipment necessary to protect them;
  • supply difficulties, unavailability or increased prices of raw materials and components, and limited capacity to produce and distribute products related to restrictive health measures put in place by the authorities of the countries in which the Group operates;
  • reductions in product demand related to the impact of measures to restrict movement on access to physical points of sale, particularly in the Travel Retail network, which is particularly sensitive to health crises; and
  • financial difficulties for suppliers and clients as a result of a drastic reduction in their levels of business.

Depending on duration, geographic expansion and the resulting economic and social consequences, health crises may have a material impact on the Group’s activities, its performance and its reputation.

The crisis management system is led by a unit at Group level that can prevent and limit the impacts of undesirable events on all its entities.

In response to a health crisis, the Group’s priority is to protect the health, safety and security of its employees. The Group responds by complying with the directives of the authorities in the countries in which it operates, and applying and adapting its worldwide, high management standards for health and safety at its operational sites and in business travel situations.

The Group’s information systems allow for the large-scale development of flexible and remote work methods and are the subject of adequate safety protection processes.

The policies to manage supply chain and inventories, and the business continuity plans of the administrative, industrial and logistics sites, equip the Group to anticipate the measures necessary to manage disruptions. Long-term relations with the Group’s strategic suppliers, its policies to diversify sources and its operational continuity plans limit the impacts of these crises.

The Group’s presence in all distribution channels, particularly online sales capacities developed with diversified partners (owned sites, e-retailers, pure players), as well as its expertise in digitised consumer relations, help maximise development opportunities in disrupted contexts.

The Group’s worldwide and balanced presence in terms of geographic areas, product categories and distribution channels, the very high responsiveness and capacity for adaptation of its teams through its strategically centralised and operationally decentralised organisational model with a strong entrepreneurial spirit and its robust financial position contribute to its ability to face the economic consequences of such crises.
Business risks/Reputational crisis management  Moderate
Risk identification Risk management

Detrimental events or information mainly related to the use or misuse of a product, or inappropriate behaviour by an individual, whether proven or not, could affect the reputation of L’Oréal, its 37 major international brands and its products and, as a result, affect sales and, more generally, its financial position.

The impact of the risk could be amplified in particular by:

  • the boom in digital and social media in all countries, characterised by the consistent increase in the influence of social media and the speed at which information and controversies are circulated;
  • the increase in the risk of false or incorrect information about the Group, its brands and its products being posted on social media, with this risk heightened by the growing use of artificial intelligence; and
  • changes in society, with the Group or one of its brands being targeted by consumer or other civil society organisations in a context of increasing polarisation of views.

The impact and management of risk associated with social selling, particularly via influencers, are described in the risk factor entitled "Changes in sales channels".

See the "Safety of people and property" risk factor in the security crisis management information.

L’Oréal has implemented the following:

  • crisis communication training, creation of a crisis management system dedicated to reputation protection and creating a network of experts, and support for the communication teams on key topics for the Group;
  • crisis risk management at corporate and local levels;
  • permanent monitoring (across 14 languages) of the Group’s media including social media accounts. The subsidiaries implement their own social media and web monitoring systems under the responsibility of their Head of Communication and immediately report any media risk in their country to the Corporate Communications Department; and
  • a crisis management procedure set up by L'Oréal aimed at preventing, managing and mitigating the consequences of undesirable events on the company worldwide. The Group crisis management officer reports directly to General Management.

The rollout of the Code of Ethics throughout the Group is aimed at reinforcing the dissemination of the rules of conduct which form the basis of L’Oréal’s integrity and ethics. These rules of conduct seek to guide actions and behaviour, inspire good choices and make sure that the Group’s values are reflected in the everyday acts of each employee. L’Oréal has implemented a Code of Good Practice for the Use of Social Media for its employees.