Annual Report Enea Group 2019

ENEA Group is exposed to risks in each segment of its activity. The risk materialisation could have a significant adverse effect on the continuity of business of individual companies of the Group, their financial standing, and ability to achieve their strategic goals.

The awareness of these risks requires maintaining, using, and constantly improving a formalised and integrated enterprise risk management (ERM) system. Its framework is determined by the single Enterprise Risk Management Policy binding in ENEA Group. At ENEA Group, ERM system is based on the comprehensive approach to the risk management issue and determination of detailed rules for risk identification and assessment.

This is the basis for identification of the key corporate risks and for monitoring of exposure to these risks as well as preparing and monitoring mitigation plans. In the case of some corporate risks, such as credit, liquidity loss, FX, interest rate, and commodity risks, as well as project design, personal data protection breach, and cyber risks, the formalised approach to risk management or risk assessment takes the form of dedicated Policies and/or Procedures.

The model functioning at ENEA Group is supplemented by the business continuity management system, the purpose of which is to identify critical processes for the operations of the key Companies of ENEA Group and to implement such actions and procedures that will reduce the risk of process interruption and ensure its continuity in an emergency situation.

The risk management rules adopted are determined on the basis of the highest management standards and compliant with relevant market practice. The Group uses IT systems to implement corporate risk, credit risk and commodity risk management processes.

Key features of the coordinated model

The risk management organisation at ENEA Group is based on a coordinated model. The assumption of the model operation is the coordination of risk management processes within ENEA Group by ENEA S.A.

Key features of the coordinated model:

Key ENEA Group companies manage risks on the basis of uniform standards set out in the Policies and Procedures.
Companies ensure operating management of risks within allocated limits and pursuant to the rules approved by ENEA Group Risk Committee.
Companies report to ENEA S.A. on the measures implemented in the area of risk management.
ENEA S.A. acts in its capacity as the process coordinator in ENEA Group.

Risk assessment

Each risk included in the Risk Register is assessed in terms of probability and potential financial, reputational and health and safety impacts in line with the Corporate Risk Assessment Scale. The assessment scale defines the scope of the Risk Management Plan and monitoring frequency.

Risk management process

The risk management process at ENEA Group is a multi-stage process, engaging all the significant organisational units of the Group Companies.

Identification and assessment of new risks

Identification of potential risks related to the ongoing operations of the Companies and threatening the achievement of strategic objectives of ENEA Group and objectives resulting from the area strategies, and their subsequent assessment in accordance with the ERM Methodology. Development of the Risk Handling Plan and undertaking actions to mitigate the risks by risk owners.

Monitoring existing risks

Risk owners monitor the effects of their mitigation actions on an ongoing basis and, if necessary, modify the Risk Action Plan. They also communicate this information to the risk manager at fixed periods

Incidents and significant changes in existing risks are reported on an ongoing basis.

Reporting risks

Periodic reporting at the level of the Company by the Risk Manager to the Company’s Management Board.

Periodic reporting on the level of ENEA Group by the Risk Management Department of ENEA S.A. to ENEA Group Risk Committee.

ENEA Group Risk Committee

The key authority in the risk management process at ENEA Group is the Risk Committee. The Committee is an interdisciplinary body composed of the representatives of key business areas at ENEA Group who represent all key companies of the Group.The Risk Committee is composed of dedicated members of the Management Board of ENEA S.A. and its Subsidiaries within the Group as well as ENEA S.A. department directors in charge of risk management, audit and Compliance.

For the Risk Management and Compliance Area:

1. Giving recommendations to the Management Board of ENEA S.A. on approving the policies governing the process of managing risks, business continuity, insurances,
and compliance with approval of any relevant updates.

2. Accepting and analysing information received from Content Management Units in the area of managing risks, business continuity, and insurances.

3. Providing opinion on annual reports on the Compliance Policy implementation which are submitted to ENEA Management Board for approval.

4. Accepting semi-annual reports on the Compliance Policy ongoing implementation and preparing recommendations as to the Compliance Policy implementation.

5. Issuing of binding interpretation (construction) of the Compliance Policy provisions.

6. Approving the operating documentation governing the process of managing risks, insurances, and business continuity with approval of any relevant updates (strategies, procedures, methodologies, tools, instructions, guidelines, etc.).

7. Making decisions on the issues which include, without limitation:

i. Issues resulting from the documentation governing the area of managing risks, business continuity, and insurances

ii. Giving a consent to the deviations from the rules set out in the documentation governing the areas listed in the item above;

iii. Giving a consent for ENEA Group Companies to sign contracts based on foreign law or on the settlement currency other than the Polish, except for:

iv. framework agreements based on the EFET standard and related surety agreements, if they fulfil the following cumulative conditions: they will be based on German law, the binding language will be English, disputes will be settled before an arbitration court, the euro or the Polish zloty will be the currency of trade;

v. framework agreements based on the SCoTA standard and related surety agreements if they fulfil all of the following conditions: they are based on German or English law, the binding language shall be English, disputes shall be settled before an arbitration court, the currency of trade shall be the euro or the US dollar or the Polish zloty;

vi. biomass purchase contracts and related suretyship, guarantee or letter of credit contracts, if they fulfil all of the following conditions: they are based on German, English or Polish law, the binding language is English or Polish, the currency of trade is the euro, US dollar or Polish zloty;

vii. other agreements for an amount not exceeding the equivalent of EUR 10,000, provided that the sum of such agreements concluded by the Company in a calendar year without obtaining the consent of the Risk Committee may not exceed the equivalent of EUR 50,000; after exceeding the limit of the equivalent of EUR 50,000, the conclusion of each subsequent agreement meeting the criteria of foreign law and a settlement currency other than Polish zloty requires the consent of the Risk Committee;

For the Market Regulation Area:

1. Issuing guidelines concerning the presentation of the position and undertaking negotiation, regulatory, and lobbying activities in favour of ENEA Group companies in the scope of market regulations.

2. Setting the direction and scope of the analysis of the impact of market regulations on development and investment plans and strategy of ENEA Group.

3. Receiving and analysing information from the Market Regulation Area received from the Substantive Entities.
Merytorycznych.

The Risk Committee is composed of dedicated members of the Management Board of ENEA S.A. and its Subsidiaries within the Group as well as ENEA S.A. department directors in charge of risk management, audit and Compliance.

01 The activity of the Group

Risk management