Consolidated Financial Statements
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 associ-
ated 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 fi-
nancial performance.
Financial riskmanagement is headed by the Finan-
cial Department based on the policies approved
by the Board of Directors. The treasury identi-
fies, 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 ex-
change risk, the interest rate risk, the credit risk
and the investment of surplus liquidity.
a) Market risk
i) Currency exchange risk
With regard to exchange rate risk, the Group
follows a natural hedge policy using financing
in local currency. Since the Group is mainly pre-
sent in the Iberian market, bank loans are main-
ly denominated in euros and the volume of pur-
chases outside the Euro zone are of irrelevant
proportions.
The main source of the Group’s exposure arises
from the investment outside the euro area of
operation that develops in Angola, although it is
still small is growing and consequently to gain
weight in the group activity. The reduction of oil
prices is to lead to a shortage of foreign curren-
cy in Angola by the devaluation of the kwanza is
a risk to consider. The financing of the Angolan
subsidiary in foreign currency in the amount of
$ 2.000.000, does not have large exposure due
to the reduced amount. The remaining financing
concerning Angolan subsidiaries are denominat-
ed in the local currency, the same in which the
income is generated.
In 31 December, 2015 and 2014 currency ex-
change risk was as follows:
226
