Page 102 - Annual Report KELAG Group 2018

The focus of group-wide risk management relates to the risk categories identified for the KELAG
Group: market and competition risks, credit risks, operational risks, financial risks, systemic risks
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.