GROUP OVERVIEW Main risk factors 1 The families of risks identified could have a range of different 1.8.5.4 Compliance and image risks consequences: Klépierre’s non-financial performance is playing an increasing role > a health incident resulting, for example, from internal pollution in its image vis-à-vis all its stakeholders (shareholders, customers, could produce a hazard to users and neighbors. A failure of this employees, partners, etc.). As a result, a lawsuit for non-compliance kind would have immediate local consequences in terms of footfall, with an environmental regulation, an environment scandal or a major reduced revenues for retailers and the loss of rent for Klépierre on under-achievement would be likely to have an adverse effect on the site concerned, as well as a negative impact on the Group’s Klépierre’s ability to attract investors, sell, develop or lease all or part reputation; of its portfolio but also to hire new employees. > an environmental incident caused by human error could also Klépierre ensures complete compliance with applicable mechanisms, reflect badly on the Group’s reputation and expose its management at all levels, through ongoing environmental monitoring but also to liability; through its participation in a range of specialist industry bodies > under current environmental laws and regulations, Klépierre, as (EPRA, ICSC, CNCC, etc.). The Company then allocates all the budgets the current or previous owner and/or operator of an asset, may be for measures required to both comply with applicable regulations but liable for identifying hazardous or toxic substances affecting an also to keep improving its overall environmental performance. asset or a neighboring asset, and removing and cleaning up any such contamination found. 1.8.6 Insurance risks 1.8.5.2 Risks related to climate change Klépierre and its subsidiaries (including Steen & Strøm) are covered by Group-wide international insurance programs underwritten by prime Klépierre closely monitors and anticipates both climate change and insurers allowing: the potential economic impact, with four major risks having been > identical replacement cost and loss of rent cover for all assets, identified: irrespective of their location, by appropriate property damage and > the physical risk of deterioration to properties in the portfolio: terrorism insurance programs. Replacement cost is determined by Klépierre prioritizes the safety and security of individuals and means of assessments carried out by independent appraisers at goods and performs regular organizational audits across its five-year intervals; shopping centers to mitigate the impact of extreme climate events > cover of the consequences arising from Group companies’ but also to be in a position to properly anticipate how its assets third-party general liability in relation to their business activities need to be adapted; or professional misconduct, including the mandatory cover for > the risk of lower returns from shopping centers: for example, as a French subsidiaries falling within the scope of the Hoguet law on result of regulatory or tax changes, something Klépierre closely professional licensing requirements. monitors through the industry bodies of which it is a member. The amount of insurance cover was determined on the basis of a Returns on its assets may also decline as a result of a possible range of factors (size of the Group, business, geographic footprint, increase in energy costs.; stock market listing, portfolio, etc.). The premiums reflect the Group’s > the risk of a “valuation haircut” in the valuation of assets, actual claims history. Insurance contracts are put out to tender by resulting from use changes by Klépierre clients. The impact of Klépierre on a regular basis. climate change will over the medium-term give rise to significant The Group’s construction activities are covered by specific changes in visit profiles and modes of transport used which could, construction policies (property and general liability), in compliance ultimately, significantly reduce footfall at certain shopping centers. with the legal requirements in force in the countries in which the To mitigate this risk, Klépierre has a strategy to optimize its asset Group operates and more specifically in France with the requirement portfolio that incorporates public transport connections for all new to carry Dommages Ouvrage policies. projects. Klépierre is also looking to support these use changes by adding electric mobility infrastructure at its shopping centers; Depending on the type of risk, the Group is reliant on the financial > finally, reputational risk and the potential impacts in terms of strength of insurers and may have to contend with the limitations of opinion and customer satisfaction should not be overlooked. the insurance market and thus may no longer be fully or even totally That is why Klépierre has a pro-active sustainable development covered against certain risks. approach, backed up by ambitious goals, primarily in terms of the It is also possible that insurers may become insolvent, or insurers may Company’s low-carbon strategy. experience financial difficulties impairing their insurance capabilities and thus no longer be able to settle the claims covered by the Group’s 1.8.5.3 Risks related to the procurement insurance policies. of natural resources The occurrence of exceptional and/or a very high frequency of losses The operational management of Klépierre portfolio assets requires may have an impact on the amount of insurance cover available to the the use of a non-negligible amount of natural resources to ensure the Group. The possibility of an increase in the cost of insurance arising proper functioning of installations but also the safety and comfort from market conditions cannot be discounted. of shopping center visitors. Such usage exposes the Company to Even though the Group is covered by appropriate insurance programs, two risks: that of the increasing scarcity of resources and that of the certain losses may not be covered or may be only partially covered volatility of supply costs. which could lead to a full or partial loss of rent and of the capital invested in the asset concerned, even where the non-covered risks are residual or originate in a deliberate action of the insured. KLÉPIERRE 2017 REGISTRATION DOCUMENT 31