The Mondadori Group’s internal control and risk management system refers to the set of procedures, organizational structures and associated activities designed to ensure proper management of the company in line with its pre-established objectives, through adequate identification, measurement and monitoring of the main risks it faces.
The guidelines and overarching themes of the internal control and risk management system are based on the principles set out in Enterprise Risk Management (ERM), an international standard drawn up by the Committee of Sponsoring Organizations of the Treadway Commission (COSO Report).
As of 2008, when defining these guidelines, the Mondadori Group has followed a process designed to identify, measure and manage the main risks and uncertainties it faces as it pursues its business objectives.
It has established a Risk Management function, which is responsible for developing an internal risk management model and overseeing the execution and periodic updating and monitoring of the process.
The significance of the risks – which are classified into categories and sub-categories – is determined based on measures of their likelihood of occurrence and their impact not only in financial terms, but also in terms of market share, competitive advantage and reputation.
Using a self-assessment process, company management identifies the risks associated with their areas of responsibility and assesses their effects on the objectives previously set out by overall business managers and staff. The assessment is carried out both at the level of inherent risk, i.e. in the absence of mitigation measures, and residual risk, following actions taken to reduce the likelihood of the occurrence of the risk event and/or to contain its possible negative effects.
The results are collated and processed by the Risk Management function and reported specifically to the Risk and Control Committee, the Board of Statutory Auditors and the Board of Directors.
The status of the risks is reviewed and updated at least annually.
The existence and effectiveness of mitigation actions, as reported by management in the assessment phase, is checked by the Internal Audit function.
In addition, to bring the residual risk back below an acceptable risk threshold (the “risk appetite”), the Risk Management function works in conjunction with company managers to plan and implement risk response actions, mapping the additional mitigating actions it prepares.

CONTINUING IMPACTS OF THE CORONAVIRUS EMERGENCY
The pandemic crisis has reiterated, on a global level in a new and dramatic way, the issues related to health, environment and welfare, placing sustainability more than before at centre stage.
For some time now, the Mondadori Group has classified the risk areas with the greatest impact related to Sustainability, adding in 2020 the risks associated with the effects of the pandemic.
The pandemic has deprived societies of the benefit of planning, understood as linear progress, unhindered by external contingencies.
The lesson learned is to take the necessary actions to counteract unpredictable risks and implement the principles of Risk Management & Business Continuity, in order to make organizations more resilient.
The management plans implemented by the Mondadori Group in response to the pandemic crisis include the complete and up-to-date mapping of pandemic risks, comprising both risks deriving from the direct impacts on business (production stoppages, slowdowns in receiving orders from clients, etc.) and the indirect impacts from organizational measures (delays in production, etc.).
Based on the results of the analyses carried out, below are the main risks that the Group is exposed to and the mitigation actions undertaken.
The areas of risk are grouped as follows:

  • associated with the economic scenario;
  • legal and regulatory;
  • financial and credit;
  • strictly business-related, understood as product competitiveness;
  • associated with brand protection.
The most significant risks, in relation to the business segments in which the Group operates, come from the external context and are caused almost entirely by the ongoing pandemic emergency.
Against this backdrop, the books market recorded a slight increase, versus the sharp drop in the advertising and circulation market: both represent the main external risk factors identified in the latest Risk Assessment.
Main risksMitigation actions
Downturn of the advertising and circulation market.Portfolio innovation that points to alternative and innovative forms of communication such as website development, integrated communication platforms and event creation.
Relevant market trends, with repercussions on Group performance.Trade area: ongoing focus on product quality and innovation of the publishing offer also through targeted integration strategies with the development of digital activities.
Education area: focus on product planning for the different programmes to encourage adoption. Ongoing product renewal aimed at increasing the ratio of adopted to sold.
Retail area: customer loyalty activities, fine-tuning of non-traditional sales channels (e-commerce) and reduction of structural costs.
 Drastic reduction in sell-out and average sales, especially for the titles whose sales are event-driven, and stalled due to the pandemic; increased risk across the board, due to margins focused on few successful titles/authors.Improvement in publishing efficiency through process rationalization.
Enhancement of the talent scouting unit.
Growth of the audio books channel.
Development of new forms for promoting titles, through the digital channel, as an alternative to the traditional channel.
Synergies with Retail and Digital marketing.
The current market context, set out in detail in the above paragraph, is mirrored in additional elements of risk tied to trade receivables, arising from potential contract non-fulfilment and cases of insolvency of counterparties.
Growing importance is attached to continuously improving the efficiency and effectiveness of logistics processes, and of planning processes not only for raw materials, but also for finished products.
Main risksMitigation actions
Inadequate support to the assets on the balance sheet, in light of the current and future market trend (resulting in particular from the pandemic) and of the Group’s financial results.Ongoing monitoring of assets and write-off in order to ensure that the business-financial performance is in line with the company plans.
Receivables: collection time and increased counterparty insolvency.Ongoing monitoring of customer credit exposure and use, if required, of hedging instruments.
Preventive analysis of customer solvency.
New and more stringent parameters for credit control vs. franchisees.
The variables faced by publishing and the media remain appreciable: on the one hand, the uncertainty arising from relevant market trends and the transition towards new business models on the other that represent elements of discontinuity capable of disrupting the traditional market balances.
New consumer habits have changed as a result of the lockdown, and have increased e-commerce channels, to the detriment of traditional channels.
This contingent situation could irreversibly change customer behaviour, whose habit of making online purchases, overcoming the initial reluctance and fears, could become routine.
In the new scenario that is materializing, the online channel needs to be innovated in order to engage the customer more, improving the customer service process.
In this context, the risks generated by the increased level of competition in the main areas are a priority.
Main risksMitigation actions
Growing competition in the Group’s markets, due to increased competitiveness of existing players and to new players coming into the market.Further actions to overhaul the business model, including through the use of new platforms.
New search engine in the e-commerce site in order to continue performance development.
New formats and investments in new technologies to support digital events (cybersecurity).
The Mondadori Group operates in a complex regulatory context given the variety of the business areas in which it operates.
The introduction of new regulations as well as changes to existing ones, including at the level of emergency compliance due to the pandemic, may have an impact in terms of affecting competitiveness and market conditions in specific business areas in addition to generating higher charges in the internal compliance processes.
In this respect, the Mondadori Group, in line with the requirements set out in the Corporate Governance Code for Listed Companies, defined an adequate internal control and risk management system which, through the identification and management of the main company risks, contributes to ensuring the protection of the company assets, the efficiency and effectiveness of company processes, the reliability of financial disclosures, and the compliance with laws and regulations, the company by-laws and internal procedures.
Main risksMitigation actions
Criticalities associated with regulatory developments on specific business issues regarding the Group’s areas of operation.Constant control and active participation in discussions for the issuance of new regulatory provisions also thanks to the involvement of the main category associations. Timely adjustment of business activities and products to regulatory changes also through the adoption of newly enforced regulations in the Group’s internal policies.
Burden/criticalities from regulatory obligations following changes in the “traditional” and, in particular, “emergency” legal framework (Privacy, MAR, Whistleblowing, Legislative Decree 49/19, Business Crisis Legislative Decree 14/19).Attendance, through the trade associations, in discussions on the issuance of new measures.
The value and prestige of the brands, contents, authors and reader communities represent a relevant asset for the Group to develop and grow also in the new business areas of the publishing industry.
Consequently, the Group’s policies and activities are geared to maintaining and improving the value of such intangible assets.
Main risksMitigation actions
The materialization of events that may damage the Group’s image and brands could result in the loss of customers, profit and reputation.Monitoring and prompt actions on different information sources through appointed functions (external relations, sustainability, and social media).

Main non-financial risks

In order to meet the requirements of Legislative Decree 254/2016, as part of the Group’s increasing commitment to sustainability, which also took its cue from a review of the relevant stakeholders, Risk Assessment included a complete and systematic analysis of the risks associated with the social and environmental effects of the company’s activities. 

Health and safety risks do not apply to our business.

Climate change is a major issue for all industries, no less so for publishing. In the publishing industry, greenhouse gas emissions are mainly connected with energy consumption, transport (for example, the efficiency and effectiveness of processes in the logistics/distribution or business travel field) and the production cycle of paper products. Growing concern on the part of stakeholders and institutions over climate change could lead to adjustments, in the future, to current legislative provisions governing emissions.
Alongside the risks associated with climatechanging emissions are the risks associated with energy efficiency, which if low could adversely affect economic benefits, and the risks associated with potential interruptions in paper supply. It should also be noted that social and environmental performance is becoming increasingly important in assessing the Company’s suppliers.
Main risksMitigation actions
Growing pressure from stakeholders and national and international institutions with regard to climate change.Constant oversight of the issue through continuous monitoring of overall greenhouse gas emissions produced by the various operations of the Group (such as product distribution and logistics and business travel) and the identification of effective actions for their reduction.
Loss of opportunities for economic benefits due to reduced effectiveness of energy efficiency measures.Constant oversight of the issue through continuous monitoring of overall energy consumption, strong focus on the upgrading of IT equipment and identification of energy efficiency measures in workplaces.
Interruptions in the production process due to the shortage of paper as a raw material.Gradual extension across the Group of the use of FSC and PEFC certified paper.
The publishing industry inevitably involves risks associated with human rights (freedom of expression and privacy protection) and with social topics (media literacy, product accessibility), especially given the role that media companies play in promoting and spreading culture.
Such risks can arise from actions taken within the Group, but also from conduct deriving from external causes. There is no question that in such circumstances, the crucial aspect will be to monitor the growing risks in terms of personal freedom, well-being, educational prospects and wealth of the younger generations.
Main risksMitigation actions
Critical issues related to potential restrictions on the freedom of expression of authors.Continuous monitoring of the variety of titles published.
Critical issues related to the publication of editorial content considered sensitive, the loss of customer data and changes in the relevant legislation (GDPR, e-privacy, etc.).Constant monitoring of sensitive data management practices and continuous improvement through the development of specific initiatives across the various company functions and the various Group companies.
Critical issues related to the change in the way consumers purchase books, who have opted, during the lockdown period of the pandemic, and the resulting closure of bookstores, for the online channel.Efforts should be made to develop the online channel, in order to be competitive on the market and enhance customer purchasing experience, by leveraging on multichannel benefits, understood as the concurrent use of online and traditional channels (e.g. the “Libreria Infinita” portal; pick up point; “book and collect” service).
Growing pressure from the public to distribute quality publications, which are impartial and respectful of diversity.Continuous improvement in editorial content and product quality.
Changing demands from the audience as regards tools for accessing editorial content.Monitoring of the accessibility demands of the audience and the ability of the company to respond to such needs.
Critical issues related to the inability by readers to grasp the value of products sold, where suitable instruments are not provided to facilitate a fair understanding of media.Continuous improvement in initiatives to raise awareness and educate the public as to the need to critically assess and analyze media.
Critical issues related to a potential increase in competitive pressures in relevant markets, which could lead to unfair conduct by competitors.Constant oversight of the issue through specific training for internal personnel and networking activities with trade associations.
National and international institutions and organizations are leading the battle against corruption and bribery. As the phenomenon remains widespread, it represents a major hurdle to development, with an enormous impact on economic growth, both in the private and public sectors.
Against this backdrop, even for the Mondadori Group, the risks associated with the infringement of internal rules and relevant laws in force are of priority concern.
Main risksMitigation actions
Critical issues related to conduct infringing the laws in force by those who act in the name or on account of the Group.Constant oversight of the issue through organizational measures and controls to help ensure and spread proper conduct (personnel training, selection of non-publishing products bundled with the publications, monitoring of the legal framework, networking with other companies in the sector).
Adoption of the whistleblowing procedure, with the relating implementation of an IT system managed externally (to guarantee violator and whistleblower privacy) as a communications channel to handle reporting; amendment of Model 231 of the parent company and its subsidiaries; employee training plan.
Strong commitment by Top Management to the activities of the Procedures Committee.
Drafting of a specific anti-corruption procedure following a specific risk assessment.
The success of the Mondadori Group is built squarely on the shoulders of the people who act in its name or on its account. Their skills and motivation are fundamental factors in the development of innovative solutions able to correctly interpret changes in relevant markets and in society, which are necessary to guarantee the financial performance of the Group and its competitive standing.
This is why the Mondadori Group is committed to establishing true dialogue with its people, to encourage a greater understanding of the respective needs and to find solutions to any existing issues.
Main risksMitigation actions
Risk that technological development, changes in the competitive scenario and low turnover rates may lead to a gradual skills gap in personnel.Creation and implementation of engagement and training plans able to provide the skills needed to develop innovative solutions that can correctly interpret changes in the market and in society.
Risk that a more dynamic jobs market may make it harder to retain people and attract new talent.Continuous improvement in human resources management practices, in terms of negotiation, career management support, training, retention and job rotation policies.