IBERSOL | Annual Report 2021

ANNUAL REPORT 2021 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 proportions. It should be noted that the main source of exposure comes from the investment 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 remaining financings contracted by the Angolan subsidiaries are de- nominated in local currency, the same in which the income is generated. In view of the limitations on payments abroad, the Group adopted, in the past, 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 relative 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 independent of changes in the market interest rate. With regard to the Angolan State Treasury Bonds, indexed to the US Dollar, interest is fixed, so there is no risk either. The Ibersol Group’s main interest rate risk arises from liabilities, particu- larly long-term borrowings. Loans issued at variable rates expose the Group to the risk of cash flows associated with the interest rate. Loans issued at fixed rates expose the Group to fair value risk associated with the interest rate. At the current level of interest rates, the Group’s policy is, in mature loans, to fix interest rates up to 30% of the outstanding amount. c) Credit risk In the Group’s main business, sales are paid in cash, or debit or credit card, so the Group does not have relevant credit risk concentrations. In relation to customers, the risk is limited to the Catering, sales through aggregators and Franchisees, which represents around 6% of consoli- 271