Commitment to Excellence

Risk Management & Compliance

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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.

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.

Identifying and understanding risks allows for informed decision making when actively managing events that could potentially have a negative effect on:

  • cash flow and profitability;
  • strategic business objectives;
  • tangible and intangible assets.

Within this context, the Group’s Risk Management department supports the organization to:

  • manage risks in terms of prevention and mitigation;
  • proactively seize opportunities;
  • disseminate a culture of risk evaluation across the Group’s decision-making process, in particular, in the strategic planning process and significant business decisions;
  • ensure that the Group’s risk exposure is consistent with the Board of Director’s risk appetite and does not exceed its financial and economic capacities given the objective of achieving long-term sustainable performances;
  • assure transparency and adequate information on Luxottica’s risk profile and risk management strategies to top managers, the Board of Directors and other relevant stakeholders
The risk categories potentially applicable to LuxotticaRisk management objectives

External risks

External factors, which are completely beyond the control of the Group and might have a negative effect on its business and assets

  • Monitor risk factors
  • Measure Group resilience
  • Mitigate the impact in case the risk occurs

Strategic risks

Characteristic of the eyewear industry and/or strictly driven by Luxottica strategic decisions

  • Create awareness during the decision making-process
  • Have a risk-reward analysis
  • Consider the cost for risk mitigation and the impact of risks  on the Group’s economic and financial targets

Operational risks

Generated by ineffective organizational structure, internal processes and systems

Reduce risks impact and probability through:
  • Continuous improvement of internal control systems
  • Adequate allocation of resources in strategic plan and budget

To meet these goals, in 2011 the Risk Management department launched a proactive, structured and coordinated Enterprise Risk Management (ERM) approach to identify, manage and monitor risks with potential negative impact on the future growth of the Group and its tangible and intangible assets. The approach is integrated into the Company’s processes, supports its strategic and operating decisions and permeates the entire organization.

The five correlated phases of Luxottica’s Enterprise Risk Management

Risk framework The Group Risk Model defines the risks potentially applicable to Luxottica and the methodology used by the Risk Management department
Risk assessment Carried out on a yearly basis, the Risk assessment makes it possible to identify the potential risks to which the Group is exposed, assess their impact and, on the basis of the probability of them occurring, establish action plans
Risk reporting It consists of activities to share the mapping of risks and related mitigation plans with the management and Control and Risk Committee
Risk treatment Implementation of the approved action plans and risk management strategies
Monitoring The progress of the action plans and the Key Risk Indicators (KRIs) are periodically monitored in order to guarantee correct and prompt risk mitigation

COMPLIANCE RISK MANAGEMENT

Luxottica’s global dimension requires the constant alignment of the Company’s processes, procedures, conduct and activities with the regulatory frameworks and the Group Code of Ethics. Below are the main compliance programs that Luxottica has been working on for some time.

The prevention of corruption

In terms of anti-corruption, the Compliance department oversees the definition of rules to prevent, identify and manage risks connected with corruption in the Group’s businesses, in accordance with the law as well as applicable local and international regulations.

This commitment is outlined in the Code of Ethics and is further strengthened by the adoption of company policies and procedures that regulate the areas that could be exposed to corruption crimes.

In 2018, the Compliance department, in collaboration with the Internal Audit department, developed and distributed a new version of the procedure for reporting and managing accidents to all local internal representatives. This procedure complements the existing content of the Code of Ethics and the Organization, Management and Control Model adopted in 2005 in accordance with Italian Legislative Decree 231/2001 as amended, which addresses the issue of reporting corruption. The Model takes the form of a series of principles and rules of conduct, operating procedures and disciplinary systems designed to prevent the committing of illegal acts and to guarantee the ethical behavior of those that work on the Group’s behalf.

Luxottica is part of Transparency International, the biggest global organization for the prevention and combating of corruption, and actively participates in conferences and meetings where it shares best practices in this area. In 2018, the Compliance department presented its anti-corruption programs at Transparency International’s Business Integrity Forum and at the Italian Business Integrity Day held at the Embassy of Italy in Washington. Among these programs is the “Be transparent and keep it transparent” compliance program which Luxottica launched in 2017 and is dedicated to combating corruption. This program is applied at the global level and presents specific rules for the prevention, identification and management of corruption risks in the Group’s sphere of activities. It integrates initiatives already in progress and pre-existing company documents, such as the Code of Ethics, and is based on specific rules that all Group employees must adhere to in their daily activities.

For more information on the Group’s “Be transparent and keep it transparent” program see the LUXOTTICA ANTICORRUPTION COMPLIANCE PROGRAM

Privacy

With over 7,100 directly operated stores around the world and a growing presence in the e-commerce sphere, Luxottica is aware of just how much its customers value their privacy. The company is committed to guaranteeing maximum levels of transparency in the way it collects, uses, communicates, transfers and retains information relating to them.
In 2018, Luxottica continued to implement the measures required to guarantee compliance with the General Data Protection Regulation (GDPR), effective across Europe since 25 May 2018.

Anti-money laundering prevention

In 2017, Luxottica developed and disseminated at global level the “Anti-money laundering and terrorist financing policy”, whose aim is to guarantee respect for all laws and regulations, actively prohibiting and preventing any activity that may be considered or which could facilitate money laundering and/or the financing of terrorist or criminal activities. The policy was subsequently reviewed in 2018 to better define the responsibilities surrounding prevention and monitoring activities at a local level. Building on the existing policy, the Compliance department organized specific training activities on the content of the policy and provided support for the implementation of the controls established by the document.

Antitrust compliance

In line with the Code of Ethics, Luxottica has had an Antitrust program since 2015 which defines principles of conduct in the management of business practices.
Implementation policies and programs are available to all Group employees and, as in previous years, a training activity involving around 700 people exposed to this type of risk was held in 2018.