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to a great extent by observing legislative provisions.
The most significant components of financial risk
are changing interest rates and securities prices and
currency and credit risk.
acts. Operational risk also includes IT risk, which is
the risk of loss resulting from inadequate information
technology and processing, particularly in terms
of manageability, access, integrity, supervision
and continuity. Operational risk is managed
The risks related to market risk management are
managed independently by Group companies using
methods linked primarily to the legal aspects of
specific industries and may vary significantly by
individual divisions. Group companies monitor
and manage market risks from investments in
other issuers of securities by carefully selecting
the industrial and geographical composition of
investments. In the asset management activity,
market risks are monitored, measured and managed
using quantitative risk measurement methods
compared with selected profitability criteria (beta
parameter values compared to a benchmark,
tracking error and relative risk). In accordance with
the Insurance Act, insurance companies are obliged
to match long-term business fund investments with
their liabilities arising from insurance contracts, the
amount of which depends on changes in exchange
rates, interest rates and securities prices.
Operational risk
Operational risk (including legal risk) is the risk
of loss arising primarily due to inadequate or
incorrect implementation of internal controls, other
inappropriate conduct by personnel involved in
the company’s internal operations, inadequate or
incorrect functioning of systems that relate to the
company’s internal operations and external events or
by companies by identifying opportunities and
threats in their respective areas and by managing
business processes. The management of these
risks is subordinate to the strategic and business
objectives of individual areas and companies. The
Group manages operational risk by introducing
the ISO standards and using standard software for
accounting and investments. Risks are also mitigated
by a standardised system of annual planning and
reporting that enable the parent company to be
informed about the operations of subsidiaries in a
timely manner.
Insurance risks
Within the framework of insurance risk the
company’s operations are exposed to underwriting
process risk, product design risk, pricing risk,
economic environment risk, policyholder behaviour
risk, reserving risk and claims risk.
Insurance companies in the Group have developed
their own policy for concluding insurance contracts
with the aim of spreading assumed risks. Insurance
risks are managed as follows:
Risks that exceed a predetermined amount are
transferred to a reinsurance company;
Assumed risks are spread and we achieve,
within each individual category, a sufficient number
of risks to reduce the variability of expected results;
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