In line with EDPR’s controlled risk profile, Risk Management process defines the mechanisms for evaluation and management of risks and opportunities impacting the business, increasing the likelihood of the company achieving its financial targets,while minimizing fluctuations of results without compromising returns.
RISK MANAGEMENT PROCESS
EDPR’s Risk Management Process is an integrated and transversal management model that ensures the implementation of best practices of Corporate Governance and transparency. This process is closely followed and supervised by the Audit and Control Committee, an independent supervisory body composed of non-executive members.
The purpose of the Risk Management process is to ensure the alignment of EDPR’s risk exposure with the company’s desired risk profile. Risk management policies are aimed to mitigate risks, without ignoring potential opportunities, thus, optimizing return versus risk exposure.
Risk management is endorsed by the Executive Committee, supported by the Risk Committee and implemented in day-to-day decisions by all managers of the company. It is supported by three distinct organizational functions:
.RISK PROFILER: Responsible for identification and analyses of risks, defining policies and limits for risk management within the company;
.RISK MANAGER: Responsible for day to day operational decisions and for implementing approved risk policies;
.RISK CONTROLLER: Responsible for follow up of the result of risk taking decisions and for verification of alignment of operations with general policy approved by the Executive Committee.
EDPR created three distinct meetings of the Risk Committee in order to separate discussions on execution of mitigation strategies from those on the definition of new policies:
.RESTRICTED RISK COMMITTEE: Held every month, it is mainly focused on development risk and market risk from electricity price. It is the forum to discuss the execution of mitigation strategies to reduce merchant exposure. Its purpose is also to control the limits of defined risk policies, with regards to counterparty risk, operational risk and country risk.
.FINANCIAL RISK COMMITTEE: Held every quarter, it is held to review main financial risks and discuss the execution of mitigation strategies. Exchange rate risk, interest rate risk and credit risk from financial counterparties are most relevant risk reviewed in this committee.
.RISK COMMITTEE: Held every quarter, it is the forum where new strategic analyses are discussed and new policies are proposed for approval to the Executive Committee. Additionally, EDPR’s overall risk position is reviewed, together with EBITDA@Risk and Net Income@Risk.