Page 46 - InterEnergo - Annual Report 2020
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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
                   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

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