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Financial risks


Level of risk


Change in the level of risk compared to 2017:



The Group is exposed to significant foreign exchange risk due to its foreign currency exposure which may affect the amounts of future cash flows and the financial result. Sales are the main source of FX risk in the Group: sales denominated in EUR and USD and sales indexed to EUR and USD.

Actions taken to minimize the risk: – the Group has been actively managing its FX risk. The overriding objective of the Group’s policy is to mitigate the exchange risk arising from its exposure to foreign currencies. The Group has been measuring its FX risk on an ongoing basis and takes actions to mitigate the effect it has on its financial standing. FX risk is managed in the Group in accordance with the FX Risk Management Policy at the JSW Group. In the Parent Company, there is a Foreign Exchange Risk Committee at the JSW Group, responsible for making key FX risk management decisions, in particular for hedging contracted and planned cash flows.

In an attempt to eliminate FX risk, in 2018, the Parent Company executed FX forward transactions (external), in accordance with the hedge ratios adopted by the Management Board and the Foreign Exchange Risk Committee at the JSW Group. JSW also executed hedging transactions with its subsidiaries (internal). The maturity of the transactions did not exceed 12 months. The Group also makes small purchases of materials, services or investment assets in foreign currencies. This naturally mitigates some foreign exchange risk resulting from product sales transactions. The Group employs cash flow hedge accounting. Derivative transactions to hedge the denominated exposure with maturities exceeding six months are designated for hedge accounting.

Actions aimed at minimizing these risks include: constant oversight of environmental protection legal requirements and execution of necessary investment projects to meet all environmental requirements. In connection with the entry into force on 1 January 2018 of the new Water Law Act of 20 July 2017, in Q4 2018 activities were continued order to adapt the operations of the Group’s units to the new water and sewage management conditions and to comply with all legal requirements. Because the amendments to waste management regulations introduced in the current year and planned to be introduced were significant, an analysis of the amended legal regulations was carried out and the actions were identified that were necessary to adapt the operations of the Group’s units to the new waste management requirements within the time limits set in the regulations.


The Group’s exposure to interest rate risk concerns primarily potential changes in cash flows caused by shifts in market interest rates. The Group finances its operating and investing activities also with external funds bearing interest at floating interest rates and invests free cash in financial assets which also in most cases bear interest at floating interest rates. The Group is exposed mainly to the risk of changes in interest rates in respect of the assets associated with the acquisition of investment certificates as well as deposits and cash. Interest rate risk arises from the volatility of the following reference rates: WIBOR O/N, WIBOR 1M, WIBOR 3M, LIBOR 1M for EUR, EURIBOR 1M, LIBOR 1M for USD, LIBOR 3M for USD.


The current market conditions enable generation of positive cash flows, resulting in a high level of available cash.

Actions taken to minimize the risk: Within the framework of its strategic activities, the Group intends to maintain the Closed-End Investment Fund, the role of which will be to provide a safety cushion in times of economic downturn when it will be necessary to incur expenditures not fully covered by cash inflows. The Group also intends to maintain the proper financing structure by keeping an appropriate level of long-term financing sources. The Group’s process of liquidity risk management calls for effective monitoring and reporting of the liquidity position, among others, to take preventive measures in the event of a threat to liquidity and maintaining an appropriate (minimum) level of cash available for service of current payments. Additionally, in order to achieve more effective management of current liquidity, the JSW Group has in place a cash management system named Physical Cash Pooling (PCP).

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