Page 96 - KELAG Annual Report 2017
P. 96

and other risks. Risks are identified and managed for each business division and for material
           equity investments.

           Risks can arise during the execution of operational processes and from personal misconduct, in
           any business division or investment. These are mitigated using, for example, an extensive internal
           control system, corresponding training for employees and the support of corresponding hard-
           and software with back-up systems.

           The default of trading partners or customers encompasses the risk that energy already supplied
           may not be paid or that replacement energy may have to be sourced (replacement and settlement
           risk). Risks also arise due to changes in the value of commodity positions as well as regulatory
           changes to transfer prices. Risks are mitigated by executing an initial credit worthiness screening
           and ongoing credit worthiness monitoring in line with the value of contracts with each trading
           partner  or  customer;  in  addition,  the  commodity  positions  concerned  are  closed  and  offset
           against each other.

           The KELAG Group has collateral in the form of bank guarantees, letters of comfort as well as
           security  deposits,  which  reduce  the  default  risk  of  financial  assets.  This  relates  to  hedging
           receivables from energy trading as well as securities in connection with pre-financed investments.

           The  net  gain/loss  pursuant  to  IFRS  7  generally comprises  impairment  losses  and  reversals  of
           impairment losses, interest income and cost, foreign exchange gains and losses as well as any
           gains or losses on the disposal of assets.
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