Basic HTML Version
183
ANNUAL REPORT 2011
Net investment hedge
Currently there are no foreign operational units
(subsidiaries) in currencies other than the euro,
therefore the Group is not exposed to foreign
currency exchange-rate risks.
The Group has well identified the nature of the
involved risks, guarantees through its software
that each hedge instrument is followed under the
Group’s risk policy, recording thorough and formally
the hedges relationships; the hedges goal and
strategy; classification of the hedges relationship;
description of the nature of the risk that’s being
cover; identification of the hedge instrument and
covered item; description of initial measure and
future effectiveness of the hedge; identification of
the excluded, if any, part of the hedge instrument.
The Group will consider discontinued an hedge
instrument when it is sold, expires or is realised; the
hedge ceases to fulfil the hedge accounting criteria;
for the cash flow hedge the expected transaction
in unlikely or unexpected; the Group cancels the
hedge instruments for managing reasons..
3. FINANCIAL RISK MANAGEMENT
3.1. Financial risk factors
The group’s activities are exposed to a number of
financial risk factors: market risk (including currency
exchange risk, fair value risk associated to the
interest rate and price risk), credit risk, liquidity risk
and cash flow risks associated to the interest rate.
The group maintains a risk management program
that focuses its analysis on financial markets to
minimise the potential adverse effects of those
risks on the group’s financial performance.
Risk management is headed by the Financial
Department based on the policies approved by
the Board of Directors. The treasury identifies,
evaluates and employs financial risk hedging
measures in close cooperation with the group’s
operating units. The Board provides principles for
managing the risk as a whole and policies that
cover specific areas, such as the currency exchange
risk, the interest rate risk, the credit risk and the
investment of surplus liquidity.
a) Market risk
i) Currency exchange risk
The currency exchange risk is very low, since the
group operates mainly in the Iberian market. Bank
loans are in euros and all sales and rendered
services are performed in Portugal and Spain.
Moreover, purchases outside the Euro zone are of
irrelevant proportions.
Although the Group holds investments outside the
euro-zone in external operations, inAngola, due to the