IBERSOL Sustainability Report 2017

SUSTAINABILITY REPORT 2017 Financial It is incumbent upon the Financial Department tomanage the various financial risks, to which the Group is exposed, inherent to the unpredictability of the markets, namely foreign exchange risk, interest rate risk, credit risk, liquidity risk and capital risk. The efforts made by the Financial Department aim at minimising the adverse effects of these potential risks. Foreign exchange risk In this regard, the Ibersol Group follows a natural hedge policy, obtaining financing in local currency. Given that we operate essentially in the Iberian market, bank loans are mostly in euros and purchase volumes, outside of the euro area, do not have a significant weight. Ourmain source of exposure stems from investment in the Angolan operation, which is still small in size. The drop in the price per barrel of oil is causing a shortage of foreign currency in Angola and, therefore, the devaluation of the Kwanza is a risk to be taken into account. Funding the Angolan subsidiary in foreign currency (in the amount of USD 1,000,000) does not expose us too much given that the amount is not very large. Other borrowings by Angolan subsidiaries are denominated in local currency, the same currency in which income is generated. In light of the current limitations to foreign payments, the Group has adopted a policy to monitor credit balances in foreign currency on a monthly basis and by fully hedging the risk by purchasing Angolan treasury bonds, indexed to the US dollar. 25