Corporate Governance Report
Financial
Risk management in the financial area is led by the Financial Unit, which focuses on mon-
itoring the volatility of the financial markets, especially interest rate volatility. The current
situation of the markets has led to liquidity risk taking on greater importance.
The Group’s policy regarding financial risk management is conservative and cautious when
using derivative instruments for hedging does not take positions that are not strictly related
to the activity or positions that have speculative purposes.
The main sources of exposure to financial risk are:
a) Exchange rate risk
This risk increased significantly during the last year, because the subsidiaries in Angola saw
limited access to foreign exchange, resulting in an extension of the payment terms to inter-
national suppliers, which increased its exposure to the effects of devaluation. It should be
noted that the principal suppliers are Yum, owner of the Trade Marks KFC and Pizza Hut, and
Iberusa, ACE.
With regard to financing outside the Euro zone the Group will pursue a natural hedge policy,
preferably in local currency financing.
In order to ensure adequate protection of Angolan subsidiaries to increase value of the obli-
gations in foreign currency, proceeded to the purchase of instruments indexed to the dollar,
in order to ensure the “hedging”.
Increased activity in Angola will result in an increased risk of exchange - if they maintain the
current constraints of access to foreign exchange - which will affect the value of assets and
liabilities.
b) Interest rate risk
As the Group has no interest-earning assets with significant interest, in addition to treasury
bonds issued by Angola for the purpose of “hedging”, the profit and cash flows of the financ-
ing activities are substantially independent of changes in market interest rate.
The risk of the Group’s interest rate comes from liabilities, specifically long term loans. Bor-
rowings issued at fixed rates expose the Group to fair value risk associated with interest rate.
With the current level of interest rates, the Group’s policy is, in more mature financing, pro-
ceed to the total or partial fixing of interest rates.
Ibersol resorted to hedging the risk of interest rate to 30% of borrowing until October
2016. For the financing contracted for the acquisition of Eat Out Group with a maturity of 6
years, during 2017 a coverage of at least 50% shall be provided.
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