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Report on corporate governance and ownership structure as of December 31, 2015 Page 25 of 45
The use of derivative instruments is aimed only at the actual hedging of exchange risk and interest rates that the group is
exposed to, therefore the use of these instruments for speculative purposes is not permitted. In addition to the goal of
reducing counterparty risk, the policy specifies the minimum criteria to be met in order to be able to transact with the
Group. This guideline includes:
i. the obligation to operate with qualified banking counterparties through standard agreements (ISDA Master
Agreement);
ii. a limit on exposure per individual counterparty and a limit on the total exposure of the Group,
iii. the fixing of the minimum credit credential requirements for the counterparties authorized to engage in
derivative transactions.
A quarterly reporting system has also been implemented for the Control and Risk Committee since 2007 to highlight the
debt exposure and the hedging transactions implemented to minimize “interest rate” risk, “exchange rate” risk and,
since 2011, “counterparty risk”. Since 2013, this reporting has also included information regarding evidence of High
Yield Currencies exposure.
Credit Policy
This is another operational and control policy that has been implemented for some time and is applicable to all the
wholesale companies of Luxottica Group. It was recently updated in February 2016.
This policy defines the rules and responsibilities for the management and collection of credit in order to prevent
financial risk, optimize revolving credit and reduce losses on such credits. In particular, this policy sets the guidelines
for the following activities:
1 apportionment and control of credit lines;
1 monitoring of credit trends;
1 soliciting unpaid/expired credits;
1 management and control of legal actions;
1 management and control of the appropriations and losses on credits;
1 determination and control of terms of payment in the various markets; and
1 control over warranty terms.
(III) Objectives of the system
The objectives of the ICFR system have been defined consistently within the guidelines of SOX regulations, which
differentiate between the following two components:
i. controls and procedures to comply with the disclosure obligations related to the consolidated financial
statements and the Form 20-F (Disclosure controls and procedures - DC&P). The disclosure controls and
procedures are designed to ensure that the financial information is adequately collected and communicated to
the Group’s Executive Chairman, Chief Executive Officer of Product and Operations (CEO) and Chief
Financial Officer (CFO), so that they may make appropriate and timely decisions about the information to be
disclosed to the market.
ii. internal control system that supervises the preparation of the financial statements (Internal Control Over
Financial Reporting - ICFR). The internal control system that supervises the preparation of the financial
statements has the objective of ensuring the reliability of the financial information in accordance with relevant