Consolidated management report

11. Risk management

In recent years, Wien Energie and Wiener Stadtwerke have implemented a comprehensive system of risk management which makes it possible to identify opportunities and risks at an early stage and, therefore, to be able to take the appropriate steps in good time.

In accordance with the internationally recognised principles of COSO (Committee of Sponsoring Organizations of the Treadyway Commission), the implemented risk management process covers the identification, recording and assessment of the risks of all Group companies. A further key element of the process lies in the initiation of action to counter risks. Uniform instruments such as a risk assessment questionnaire and a risk database optimally support the implementation of the process.

Compliance with the revolving risk management process is ensured by means of a permanently established risk management organisation. The risk controller acts as a central driving force behind the risk management process in all Group companies. Expert risk controllers are available to provide specialist advice on key issues (finance, IT, investments and personnel) and the related risks. They also act as interfaces to the professional bodies of these specialist areas. This ensures an optimal interlinking of the risk management system with the existing organisational structure and increases its effectiveness.

As a provider of energy services, both Wien Energie and its subsidiaries are exposed to a wide range of risks in the areas of energy generation, distribution and sales. In order to take account of the different market conditions as a result of the deregulation of the industry, Wien Energy has in recent years implemented a risk management system as a means of ensuring the early identification of opportunities and risks as well as making appropriate responses possible. The responsibilities associated with risk management have been assigned to a number of risk management officers at Wien Energie and its subsidiaries. These individuals meet to form the Risk Management Committee of Wien Energie.

Operational risk management is based on a revolving process which is performed at least once per year. The risks faced by the different organisational units are identified before being recorded and assessed in a central database. Appropriate responses are then defined, the implementation and effectiveness of these in terms of mitigating risks are monitored, and, finally, reports are submitted to the General Management. The risk landscape is divided into six areas: generation, trading, networks, sales, environment and organisation. It is in these six categories that Wien Energie manages the following key risks among others:

Technical risks

Technical risks include damage to all plant and equipment forming part of the power generation and distribution infrastructure. These operational and system failure risks are addressed by Wien Energie by means of detailed schedules for maintenance and quality control testing in addition to regular servicing and investment programmes. Outstanding levels of reliability in terms of technical plant for the generation and distribution of energy form the preconditions for the commercial operations of Wien Energie.

Price-related risks in terms of primary energy and electricity

This category of risks covers fluctuations in the prices of oil, gas and sourced electricity supplies. In the interests of professional risk management, Wien Energie counters these price risks by engaging in appropriate hedging transactions, such as derivative financial instruments, covering its source and distribution markets. Forwards, futures and swaps are used for these purposes. The development of financial instruments over time is largely dependent on developments in the relevant commodities markets. For more information on financial instruments, please refer to the relevant section in the Notes to the Consolidated Financial Statements.

Risk of default on accounts receivable

The risks of customers defaulting on amounts owed are mitigated by means of constant monitoring and associated dunning procedures.

Market risks

Market risks include price and competition-based risks in the area of sales. Wien Energie mitigates these risks by developing new products and services, through a pro-active sales policy, and through a series of partnerships and cooperations.

Investment risks

This category of risks includes short and long-term financial investments. A group-wide treasury system is in place to monitor the development of these investments over time. This system employs appropriate risk analysis concepts such as value-at-risk, allows suitable action to be taken in good time, and also provides a basis for regular reports to the General Management.

At 30 September 2008, Wien Energie is not aware of any risks which, either independently or in combination with other factors, could represent a risk or risks to the future existence of the Wien Energie Group.