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Management of financial risk

5.- Management of financial risk

Abengoa’s activities undertaken through its operations segments are exposed to various financial risks:

  • Market risk: The company is exposed to market risk such as the movement in foreign exchange rates, interest rates and commodities prices. To hedge such exposure, Abengoa uses currency forward contracts, options and interest rate swaps  as well as futures contracts for commodities. The Group does not generally use derivatives for speculative purposes.
  • Credit risk: Trade debtors and other receivables, financial investments and cash equivalents are Abengoa’s main financial assets and therefore present the greatest exposure to credit risk in the event that third parties do not fulfill their obligations.
  • Liquidity risk: Abengoa’s financing and liquidity objectives are to ensure that the company has sufficient funds available on an ongoing basis to honor all upcoming financial commitments and obligations.

Abengoa’s risk management model aims to minimize any potential adverse effects on the Group’s financial returns.

Abengoa’s risk management is the responsibility of the Group’s Corporate Finance Department in accordance with the internal rules and procedures which are in force and strictly applied. This department identifies and evaluates the financial risks in close collaboration with each of the business units. The internal procedures provide written policies for the  management of overall global risk, as well as for specific areas such as exchange rate risk, credit risk, interest rate risk, liquidity risk, the use of hedging instruments and derivatives and the investment of excess cash.

For further information see Note 4 within the notes to these Annual Consolidated Financial Statements.