IBERSOL | Annual Report 2020

ANNUAL REPORT 2020 Financial It is the responsibility of the Finance Department to manage the various financial risks inherent to the unpredictability of the markets to which the Group is naturally exposed, namely foreign exchange, interest rate, credit, liquidity, and capital risks. The steps taken by the Finance Depart- ment work to minimize the adverse effects of these possible risks: a) Exchange rate risk In this regard, the Ibersol Group pursues a policy of natural hedging, us- ing local currency financing. Since it is essentially present in the Iberian market, bank loans are mostly denominated in euros and the volume of purchases, outside the Euro Zone, does not assume relevant propor- tions. It should be noted that the main source of exposure comes from the in- vestment outside the euro zone of the operation in Angola, which is still small and in the process of losing weight in the group’s activity. The im- balances of the Angolan economy cause a shortage of foreign currency in Angola, reason why the devaluation of Kwanza is a risk to consider. The remaining financings contracted by the Angolan subsidiaries are denominated in local currency, the same in which the income is gener- ated. In view of the current limitations on payments abroad, the Group adopted a policy of monthly monitoring of credit balances in foreign currency and its full coverage with the acquisition of Treasury Bonds of the Republic of Angola, indexed to the USD. Actually, and in the last two years, operators in general have access to foreign exchange with rela- tive ease. b) Interest rate risk Except for the Angolan State Treasury Bonds, the Ibersol Group has no interest-bearing assets with significant interest. Accordingly, the income and cash flows of the investment activity are substantially independ- ent of changes in the market interest rate. Regarding the Angolan State Treasury Bonds, indexed to the US Dollar, interest is fixed, so there is no risk either. 251