The Group's risk management is fully integrated with its governance, which confers competitive advantages and creates value for shareholders, while mitigating known risks. The process focuses on identifying, assessing and mitigating any internal and external factors capable of adversely affecting the results, reputation, strategy and operations of each of its businesses.

Corporate programs and projects constantly monitor key consumption levels, indicators, targets and goals involving the Group's operations. Risk management is conducted primarily through Eternit's corporate governance structure (learn more in the section “Corporate Governance”).

The main risks, among others, are listed below: regulation in the Company’s industries – the legal issue of chrysotile in Brazil; the Company; social and environmental issues; financial risks, segmented by: market risk, credit risk, liquidity risk, etc.; and operational risks.

Eternit and other companies in the fiber-cement industry that use chrysotile as a raw material must be mindful of the risks posed by this activity in Brazil, whose legal situation is regulated by Federal Law 9,055/95, Decree 2,350/97 and the Regulatory Standards of the Ministry of Labor and Employment.

The federal government is responsible for establishing legislation on chrysotile, in accordance with the constitution. The mining, processing, use, sale and transportation of chrysotile ore in Brazil is regulated by Federal Law 9,055/95, Decree 2,350/97, Administrative Rule 3,124/78 – NR 15 – Attachment 12, which are available at www.brasil.gov.br. This legislation exclusively regulates the use of chrysotile asbestos and prohibits all other types of asbestos.

For more information, please see the Reference Form 2016 on the Investor Relations website of the Company (www.eternit.com.br/ir).

RISKS POSED TO THE COMPANY

1) Public-Interest Civil Action in São Paulo

On Aug. 9, 2013, the Labor Prosecution Office (MPT) of the State of São Paulo filed a Public-Interest Civil Action (case no. 0002106-72.2013.5.02.0009) against the Company involving substantially the same facts and subject-matters of the Public Interest Civil Action filed in 2004, with a ruling in favor of the Company that was deemed final and unappealable in 2013. However, this current action includes certain distinct claims from the previous action, such as the payment by the Company of R$1 billion for collective personal injury to be deposited in the Workers' Support Fund (FAT).

This action also addresses matters related to the workplace and occupational health at the industrial unit whose activities were shut down in the early 1990s. In parallel to this action, another Public-Interest Civil Action was filed by the Brazilian Association of Persons Exposed to Asbestos (ABREA), also in the Labor Court, for which reason the two actions were merged by court order. The actions claim payment of compensation for collective and individual pain and suffering, among other things.

On Mar. 1, 2016, both actions received partially favorable decisions for plaintiff in the lower court.

For more information, please see the Reference Form 2016 on the Investor Relations website of the Company (www.eternit.com.br/ir).

2) Public-Interest Civil Action in Rio de Janeiro

On Aug. 21, 2014, the Labor Prosecution Office of the State of Rio de Janeiro filed Public-Interest Civil Lawsuit (case no. 0011104-96.2014.5.01.0049) against the Company on issues related to working conditions and occupational illness. The final claims include payment of R$1 billion for collective pain and suffering, to be paid to entities or projects recommended by the Labor Prosecution Office or the Workers' Support Fund (FAT).

The parties signed a partial settlement already approved by Court. The claims that were not included in the settlement were challenged. The action is currently in the discovery phase.

In parallel, on Sept. 3, 2014, the Brazilian Association of People Exposed to Asbestos (ABREA/RJ) also filed a Public-Interest Civil Action (case no. 0011169-91.2014.5.01.0049) that was forwarded to the Labor Court of Rio de Janeiro, since it addresses the same facts claimed in the aforementioned actions. The action was dismissed without adjudication of the merits, with the ABREA filing an appeal against the dismissal of the action. The court overturned the decision and ABREA became a plaintiff in the action together with the MPT. The company will challenge the allegations of the ABREA at an opportune time.

For more information, please see the Reference Form 2016 on the Investor Relations website of the Company (www.eternit.com.br/ir).

3) Risks of implementing the Structured Expansion and Diversification Program

The Company plans to expand its business through the Structured Expansion and Diversification Program to become a supplier of products and solutions to the construction industry supported by the drivers of Organic Growth, Diversified Organic Growth and Inorganic Growth.

The Company and its subsidiaries are exposed to market risks related to their activities and business. The competitiveness and implementation of the Company's growth strategy could be affected by the following factors recognized as risks, which are described in item “4.1 – h" of the Reference Form 2016.

For more information, please see the Reference Form 2016 on the Investor Relations website of the Company (www.eternit.com.br/ir).

RISKS RELATED TO SOCIAL AND ENVIRONMENTAL ISSUES

Eternit's operating segments are subject to social and environmental risks inherent to its activities, such as accidents, fires, equipment faults, explosions, non-compliance with the regulations of the Ministry of Labor and Employment, toxic gas emissions, spills of pollutants or other hazardous materials, as well as the risks related to mining activities.

The occurrence of the aforementioned events could lead, among other effects, to the shutdown of the production unit, severe damage to the Company's assets, financial losses as well as damage to the environment.

Financial risks

1. Market risks

• Currency risk: the Company's exposure is related to variations in exchange rates and refers primarily to the Group's operating activities (when revenues and expenses are denominated in a currency other than the Group's functional currency).

• Interest risk: the Company's exposure is related to the risk of fluctuations in the fair value of future cash flows from financial instruments due to changes in market interest rates.

2. Credit risk

• Accounts receivable: the Company's exposure to credit risk is associated with receiving payment for its sales, which are made to a high number of clients.

• Demand deposits and financial investments: the Company is also subject to credit risks related to financial instruments contracted in the management of its business.

3. Liquidity risk

Consists of the possibility that the Company may not have sufficient funds to meet its commitments due to the different currencies and terms for the maturity/settlement of its rights and obligations.

For more information, please see the Reference Form 2016 on the Investor Relations website of the Company (www.eternit.com.br/ir).

Operational risk

Circumstances that could affect any phase of the Company's operational process, such as losses arising from faults, deficiencies or the inadequacy of internal processes, people, equipment and systems, or from external events.

Among the principles of the Eternit Group, safeguarding the health and safety of its employees and respect for the environment hold prominent positions in its guidelines and objectives. To prevent incidents and mitigate impacts, the Company conducts training programs and campaigns and uses adopts the Integrated Management System (ISO 9000, ISO 14000 and OHSAS 18000) in its plants and the mining company. In 2015, the fiber-cement plants of Eternit and Precon Goiás had their environmental and occupational health certifications renewed, effectively reinforcing their commitment to quality (ISO 9001), environmental preservation (ISO 14001) and ensuring a safe and healthy workplace (OHSAS 18001) and attesting to the Eternit Group’s commitment and efforts for sustainable practices. All units have plant commissions, which are formed by elected and/or volunteer employees and strive to ensure a healthy and safe workplace; Internal Accident Prevention Commissions (CIPA); Emergency Brigades; Safety Godfathers; and Health, Environment and Safety Committees (HES).

The preventive efforts and safety measures adopted have enjoyed excellent results. Learn more in the section “Health and Safety”.