Page 47 - 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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