LensCrafters 2013 Annual Report Download - page 66

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The process described above, which was devised to be implemented in cycles, involved a
growing number of managers, increasing from 70 in 2011 to 122 in 2013, in order that the
most significant risks to which the Group is exposed could be identified. In parallel to this
activity, specific activities aimed at mitigating the risks identified previously were carried out
directly by the Risk Management department and/or the business Managers. The Control and
Risk Committee is regularly updated on developments in the Group Enterprise Risk
Management program as well as on the results of analysis and actions taken. With reference
to compliance, in 2011 a specific program aimed at the mapping of the relevant areas of
compliance for the Group and gaining an understanding of the level of maturity and
protection of processes was set up. On the basis of this program, specific compliance
initiatives focused on Corporate Criminal Liability/Anti-Corruption, Privacy Data
Management, Responsible Sourcing/Supply Chain Compliance and Antitrust & Competition
Compliance were scoped, defined and developed over the two subsequent years. In 2013
work has continued on the definition of a comprehensive governance model for the Group’s
Compliance function, aimed at achieving a more efficient, rational and pervasive monitoring
of the processes and through subsequently reorganizing this function.
From the viewpoint of the continuous process of applying the Internal Control System and
Risk Management process to developments in operating conditions and legal and regulatory
frameworks, the Company implemented a Financial Risk Policy, which was already
introduced in 2006 and revised most recently by the Board of Directors in February 2013, and
is applicable to all the companies of the Luxottica Group.
The policy sets forth the principles and rules for the management and monitoring of financial
risk and pays particular attention to the activities carried out by the Luxottica Group to
minimize the risks deriving from the fluctuations of interest rates, exchange rates and the
solvency of financial counterparties.
The policy clarifies that the instrument used for “interest rate risk” hedging is the plain
vanilla “interest rate swaps”, whereas for “exchange risk” “non-speculative” derivative
instruments, such as “spot and forward exchange contracts” are used. In certain
circumstances and subject to the specific authorization of the CFO, more flexible instruments
that replicate the effect of the forward exchange contract or “zero cost collar”, “accumulator
forward” and “average strike forward” can be used.
The use of derivative instruments is aimed only at the actual hedging of exchange risk that
the company is exposed to, therefore the use of these instruments for speculative purposes is
not permitted.
In addition to aiming at reducing counterparty risk, the policy specifies the minimum criteria
to be met in order to be able to transact with the Group. This principle sets forth: the
obligation to operate with qualified banking counterparties through standard agreements
(Master Agreement ISDA), a limit on exposure per individual counterparty and a limit on the