Risk tolerance

Management is aware of the risk tolerance of the company and the limits that must be observed in business operations. Enterprise-level risk limits have been translated into various specific policy principles and guidelines that apply within Eneco in areas such as safety, trade mandates, authorisations and the code of conduct.

Our risk tolerance is categorised by the types of risk distinguished by Eneco:

Safety

The construction and operation of production facilities is a central aspect of our strategy. These activities lead to safety risks. In this respect, we apply the principle of ''zero tolerance''. Accidents resulting in absence from work are considered to be significant incidents and more serious incidents (hospitalisation, fatal accident) are regarded as critical or unacceptable.

Financial

Eneco pursues a growth and transformation strategy that includes substantial investments in new and existing activities. The strategy is translated into a ten-year strategic financial rolling forecast that is updated each quarter on the basis of the latest insights. Our financial risk tolerance is derived from the financial control framework. Risks that can result in exceeding or not meeting tolerance limits defined in the financial control framework form an important part of the risk management framework. Limits are exceeded or not met when the annual profit or cash flow are € 20 million or more above forecast or when the annual balance sheet total is € 100 million or more below forecast.

Integrity

An important risk, in the form of unethical or fraudulent behaviour of employees, is the integrity risk. Eneco can only play its part properly if the highest standards of conduct are applied. The Eneco Code of Conduct and the underlying guidelines define desired conduct and how to act with integrity. Considerable attention is paid to integrity awareness of employees during work meetings and workshops. There is an integrity reporting centre and employees can also contact one of the confidential counsellors for the adequate and confidential handling of integrity incidents. A baseline measurement was carried out in 2012 with respect to how employees experience integrity.

Reputation

A good and reliable reputation is essential to our existence. Negative attention is considered to be a top risk.

The risk of not achieving our strategic goal, which is the realisation of a sustainable and reliable energy supply, is also classified as a reputation risk. Not meeting the reliability requirements with respect to our network management activities or supply activities is ranked as a top risk. This also applies to the inability to fulfil our sustainability commitments to WWF in connection with the Climate Savers initiative.

In addition to obtaining insight into the possible effects of these risks, we have determined control measures for these risks.