Page 46 - InterEnergo - Annual Report 2020

Interenergo Business report Interenergo Business report

Risk management for long-term borrowings bearing a fixed interest as by an appropriate capital structure that ensures
rate, thus changes in reference interest rates on the
Company’s financial stability. The Company developed
market have no impact on the amount of Company’s a tool in the reporting period for monitoring liquidity,
finance costs. providing a better overview of liquidity requirements
and thus reducing liquidity risk.
Risks form an integral part of our activity; hence Due to the increasing volatility in the market, the
• Price risk it is of utmost importance that we are aware of company has additionally developed a tool in the last
• Low market liquidity them and manage them appropriately. Accordingly, year that monitors market risks and enables faster Operational risks
Market risk monitoring and management of positions.
risks Interenergo has a risk management system in
• Currency risk place, which ensures that all risks are identified, The Company defines the operational risks as
• Interest rate risk assessed and adequately managed. This makes the Credit risks the risk associated with the organisation of work
ratio between yield and risks consistent with the processes, human resources management, risk of
policies and guidelines adopted by the Kelag Group misjudgement and risks arising from suspension of
and management. Risks managed by the Company Credit risk is defined as the risk that a contractual business operations.
are classified into five core groups: market, credit, party will fail to meet its contractual obligations,
financial, operational and other risks. thus affecting the entity’s cash flow. Interenergo The risk of business interruption is associated with
is exposed to credit risk through already delivered the failure of the information system, power outages,
Credit • Default risk quantities, which arise from signed contracts (default etc. Operational risks are managed by the Company
risks • Non-supply risk Market risks risk), and through quantities that are not yet delivered based on established business processes, which
and would in case of the contract’s termination have include internal controls and precise job descriptions
Market risks arise from the electricity and financial to be replaced on the market at a price, which differs of individual departments and employees. Further,
markets, as well as through fluctuations of prices, from the initially agreed in the relevant contract. employees are engaged in continuous education and
interest rates, exchange rates and have an impact on training. The stability of the information system is
Company’s operations and profitability. Consequently, The Company is engaged in an active management provided through uninterruptible power supply and
all major changes in market risks are monitored and of credit risk and of its financial exposure with continuous backups of databases.
assessed on a daily basis. respect to business partners, which is based on
Financial • Liquidity risk Price risk results from possible price fluctuations a consistent implementation of internal rules
risks adopted by the Kelag Group and related and clearly Other risks
on the market, which could have an adverse impact defined procedures for identifying credit risks, and
on business operations. The concluded, but not yet on assessing the exposure, defining the limits of
delivered, electricity-related contracts are exposed permissible exposure and on the Annual Report 2019 In addition to the above stated risks, the Company
to price risk. 29 ongoing monitoring of Company’s exposure in is exposed also to other risks such as legal, country,
political risk and risk of amended legislation. Apart
The Company is exposed to low market liquidity risk relation to the individual business partner. Partners from the legal risks, the Company has no control
• Organisational risk with open positions, which in case of low liquidity who are assessed as highly risky are additionally over other risks and therefore monitors them closely
• HR management risk on the market, cannot be closed at ‘fair value’. required to submit an appropriate form of collateral and assesses the impact of changes on Company’s
Operational • Risk of The respective risk is managed through constant or insurance. operations.
risks misjudgement monitoring of open positions and liquidity-related
• Risk of suspending analyses performed for individual markets. Financial risks Legal risk is defined as the risk of loss caused
operations by noncompliance with the applicable laws and
Transactions not denominated in euro are exposed to regulations. It arises mainly from contracts and
currency risk. The Company is not inclined to accept Liquidity risk represents entity’s ability to settle its agreements not clearly specified or documented.
foreign currency risk as this is not part of its core liabilities to its stakeholders. The risk is managed The Company manages risks by combining
activity, hence transactions concluded in a foreign in the short term through constant monitoring and internal competencies and recruiting external legal
• Legal risk currency are adequately hedged through foreign forecasting of (free) cash flow, daily monitoring of professionals.
• Country risk currency forward contracts. exposure to business partners, and consistent and
Other
risks • Political risk Interest rate risk implies the possibility of loss due to efficient collection of overdue receivables. Long-
• Risk of amended unfavourable development of market interest rates. term liquidity is ensured by approved credit lines at
legislation The Company discloses receivables and liabilities the parent company and commercial banks, as well

44 Integrated Annual Report 2020 Integrated Annual Report 2020 45