IBERSOL • 2023 Integrated Management Report

INTEGRATED MANAGEMENT REPORT 2023 7. Financial Risk Management Group’s activities are exposed to a variety of financial risk factors: market risk (includ- ing currency risk, fair value risk associated with interest rate and price risk), credit risk, liquidity risk and cash flow risk associated with the interest rate. The Group has a risk management program that focuses its analysis on the financial markets, seeking to minimize the potential adverse effects of these risks on the Group’s financial perfor- mance. Financial risk management is carried out by the Finance Department, based on poli- cies approved by Management. Treasury identifies, assesses and hedges financial risks in strict cooperation with the Group’s operating units. Management provides princi- ples for risk management as a whole and policies covering specific areas, such as cur- rency risk, interest rate risk, credit risk and the investment of excess liquidity. 7.1. Exchange rate risk With regard to exchange rate risk, the Group pursues a policy of natural hedging by resorting to financing in local currency. Since the Group is essentially present in the Iberian market, borrowings are mostly denominated in euros and the volume of pur- chases, outside the Euro zone, does not assume relevant proportions. The main source of exposure comes from investment outside the euro zone in the An- golan operation, with a low weight in the Group’s activity. Unbalances in the Angolan economy have led to the devaluation of the Kwanza, which is a risk to consider. The loans taken out by the Angolan subsidiaries are denominated in the local cur- rency, the same currency in which the income is generated. The Group has adopted a policy of monthly monitoring of credit balances in foreign currency and their partial hedging through Treasury Bonds of the Republic of Angola, indexed to the USD. In 2023 the acquisition of these bonds became more expensive, as no new series of bonds have been issued. At the same time, it became more difficult to obtain all the foreign currency needed to pay for imported products, so the credit held by Portu- guese subsidiaries with Angolan subsidiaries increased. As at 31 December 2023 and 2022, the Group’s currency exposure was as follows: 463