The primary objective of financial risk management at PGE Group is to support the process of creating value for the Group’s shareholders and the implementation of the Group’s business strategy by reducing and controlling financial risk to a level acceptable to the Group’s management.
Responsibility for managing PGE Group’s financial risk lies with the Management Board of PGE S.A. The Management Board specifies risk appetite, understood as an acceptable level of deterioration of PGE Group’s financial results, taking into consideration its current and planned economic and financial situation. The Management Board also decided on the allocation of risk appetite to specific business areas.
The organisation of the financial risk management function at PGE Group is based on the principle of organisational independence of the unit responsible for measurement and control of risk at PGE Group (Risk and Insurance Department at PGE Polska Grupa Energetyczna S.A.) from business units which own risks. Risk reports are submitted directly to the Risk Committee, the Audit Committee of the Supervisory Board of PGE S.A. and the Management Board of PGE S.A.
PGE Group has a Risk Committee that exercises oversight of the financial and corporate risk management process at PGE Group. The Risk Committee monitors PGE Group’s exposure levels, sets limits for significant financial risks, accepts methodologies in financial risk resulting from trade and finance activities, permits expansions of activities in new business areas and makes key decisions regarding risk management.
Financial risk is managed at Group level, in an integrated manner. This process is implemented or supervised by PGE Group’s Corporate Centre, which is a centre of competences in this area. Risk exposures of individual business areas are considered in a comprehensive manner, taking into account the existing dependencies between exposures, the possibility of using natural hedging effects and their combined impact on the risk profile and financial position of the entire PGE Group.
The financial risk management model includes:
- collection and consolidation of data on exposure to particular categories of financial risk,
- calculation of financial risk metrics, including Value-at-Risk (VaR) and Profit-at-Risk (PaR) for specific risk factors and overall for all risk factors;
- management of the PGE Group’s consolidated exposure in relation to capital at risk and risk limits established based on it (including the identification and implementation of hedging strategies).
In key areas of financial risk, PGE Group has implemented internal regulations for managing these risks.
PGE Group is exposed to a variety of financial risks:
- market risk (commodity risk, interest rate risk, currency risk);
- liquidity risk;
- credit risk.
PGE Group’s exposure to specific financial risks depends on the scope of activities in commodity and financial markets.
26.4 Market (financial) risk – sensitivity analysis