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Goals of financial risk managementThe Group is exposed to the international market andreceives significant funding from loans denominated inforeign currencies. As the result, the Group is sensitive tothe effect of change of prices on crude oil, gas and oil derivativesmarket and the influence of exchange rate differencesand interest rate changes. Due to the sale of goodswith delayed payment, the Group is also exposed to therisk of uncollectability of receivables.At INA d.d., the Treasury performs financial services forINA d.d. and coordinates the Group’s financial operationsat international financial markets, and monitors and managesfinancial risks related to INA d.d. business activities.The most important risks include market risks (exchangerate change risk, interest rate and price change risk), creditrisk and risk from potential insolvency.The most important risks, together with the methodsused for managing these risks, are described below. To avery restricted extent, the Group has used derivative instrumentsfor risk management. The Group does not usederivative instruments for speculative purposes.Market riskCommodity risk (price change risk) managementThe variability of crude oil and gas prices is the prevailingelement in the Group’s business environment. The Groupis a buyer of oil which is most often purchased throughshort-term arrangements in USD at the current marketprice. The Group also imports a significant part of thenecessary gas whose purchase price is expressed in USDand changes on a quarterly basis, in accordance with theformula under the long-term gas purchase contract.The greatest part of INA d.d. sales are the sales of oil derivativesand wholesale of gas. The formula for definingthe price of oil derivatives is set by the Ordinance on Determiningthe Prices of Oil Derivatives which is in forcesince 2001, and offers the Group significant protectionfrom oil and derivatives price changes and from exchangerate risk, allowing a change of derivatives price every twoweeks, depending on the change of prices on the market(Platts) and the changes to the HRK-to-USD exchange rate.In 2007, it was not possible to fully apply the price formulamechanism due to the activities of the majority owner.The Group does not use forward contracts for the purposeof oil and gas price change risk management.Currency risk managementThe Company executes certain transactions in foreign currency,and is therefore exposed to the risks of exchangerate changes.The table below shows accounting amounts of the monetary assets and monetary liabilities of the Company in foreigncurrency at the date of the report.LiabilitiesAssetsINA Group 2007 2006 2007 2006Mln HRK Mln HRK Mln HRK Mln HRKAmount denominated in USD 5,569 4,083 803 748Amount denominated in EUR 256 272 242 1695,825 4,355 1,044 916Annual report 2007159