Page 177 - KELAG Annual Report 2019
P. 177

No  changes  were  made  to  the  capital  management  objectives,  policies  or  processes  as  of
           31 December 2019.

           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

           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 gains/losses pursuant to IFRS 7 mainly comprise interest income and expenses as well as
           measurement gains/losses of derivative forward contracts on commodities relating to energy.
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