Risk review

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Hydro has developed and implemented an enterprise risk management model approved by the Board of Directors. In accordance with this model, risk factors that are relevant for Hydro's business are continuously identified, analyzed, addressed and monitored. Risk management is an integral part of our business activities, and the business areas consequently have the main responsibility for managing risks arising from their business activities. Hydro’s corporate staffs establish and develop policies and procedures for managing risk, and coordinate a semi-annual overall enterprise risk assessment. Major risks are followed up, on an ongoing basis, as part of our internal performance review structure.

Risk management in Hydro is based on the principle that risk evaluation and mitigation is an integral part of all business activities. A core strategy to reduce the risks related to weak economic and unfavorable market developments is the continual improvement of our competitive and cost position as well as maintaining a solid financial position and strong creditworthiness. Hydro's integrated value chain plays a key role in mitigating risk as the earnings volatility in upstream aluminium is typically higher, whereas downstream and Energy businesses generate more stable earnings over time. 

Commodity price sensitivity +10%
NOK Million UEBIT
Hydro Group  
Aluminium 3,900

 

Currency sensitivities + 10%Footnote 1
NOK Million USD BRL EUR
Sustainable effect      
EBIT 3,860  (1,210)  (230)
One-off reevaluation effect      
Financial items 280 550 (2,170)

Footnote 1Annual sensitivities based on normal annual business volumes. LME USD 2 100 per mt, fuel oil USD 440 per mt, petroleum coke USD 400 per mt, caustic soda USD 645 per mt, coal USD 85 per mt, USDNOK 8.20, BRLNOK 2.50, EURNOK 9.60 Aluminium price sensitivity is net of aluminium price indexed costs and excluding unrealized effects related to operational hedging BRL sensitivity calculated on a long-term basis with fuel oil assumed in USD. In the short term, fuel oil is BRL-denominated Excludes effects of priced contracts in currencies different from underlying currency exposure (transaction exposure) Currency sensitivity on financial items includes effects from intercompany positions.

 


Updated: February 22, 2018