Definition of risks
(Management of these risks is described on the page Risks and risk management)
| Political risk (1) | Operational risk (2) | Environmental risks and environmental liabilities (3) |
| The risk of financial loss stemming from political decisions. | By operational risk is meant the risk of errors or defects in the company’s routines, leading to economic loss or loss of trust. | By environmental risks is meant the probability of accidents and defects in operations and their impact on the environment. By environmental liabilities is meant identified environmental problems in which demands for remedial measures can be expected. |
| Liquidity risk (4) | Interest rate risk (5) | Currency risk (6) | Credit risk (7) |
| Liquidity risk pertains to the risk for a lack of liquidity caused by a failure to meet borrowing needs. | Interest rate risk consists in part of the risk of the market value of investments falling and in part of a poorer balance of net interest and expense in the Group associated with rising interest rates. | Currency risk pertains to the risk of a negative impact on the consolidated income statement and balance sheet caused by changes in exchange rates. | Credit risk arises, for example, in transactions with customers and is defined as the risk of a counterparty failing to fulfil its obligations. Measurement and management of credit risk are conducted within the respective business units. |
| Generation | Trading | Sales | Networks |
| Electricity price risk 8 Earnings risk stemming from changes in the wholesale price of electricity. Plant risk 9 Vattenfall’s generation plants can be damaged by incidents and accidents, which as a rule also give rise to costs associated with outages. Fuel price risk 10 Risk of loss due to changes in the market price of the fuels that Vattenfall uses in its generation plants. Measurement and management of this risk are conducted by the respective generation units. Investment risk 11 The risk of loss caused by investments losing value (such as due to changes in electricity prices, delays, increased risks, etc.) Volume risk 12 Volume risk is an earnings risk arising from uncertainty of available generation capacity, such as water supply and the related uncertainty regarding future hydro power generation. |
Electricity price risk 8 Risk of loss due to changes in the wholesale price of the electricity that Vattenfall conducts physical and financial trading in. Price area risk 13 Price area risk arises when electricity prices differ between geographical areas due to shortages in transmission between areas. This risk is managed centrally by Vattenfall Trading Services. Liquidity risk 4 Liquidity risk pertains to the risk of not being able to pursue the trading strategy due to insufficient liquidity in the market. Currency risk 6 Currency risk pertains to the risk of a negative impact on the consolidated income statement and balance sheet caused by changes in exchange rates. Credit risk 7 Credit risk arises, for example, in transactions with a counterparty and is defined as the risk of a counterparty failing to fulfil its obligations. Measurement and management of credit risk is conducted within the respective business units. |
Electricity price risk 8 Earnings risk stemming from changes in the wholesale price of electricity sold to customers. Volume risk 12 This is defined as deviations in delivered volumes compared with anticipated volumes for customers, caused by weather and economic factors. Vattenfall uses simulation models to measure volume risk. Credit risk 7 Credit risk arises, for example, in transactions with customers and is defined as the risk of a counterparty failing to fulfil its obligations. Measurement and management of credit risk is conducted within the respective business units. |
Plant risk 9 The risk of damage to Vattenfall’s transmission grid and distribution networks. Credit risk 7 Credit risk arises, for example, in transactions with customers and is defined as the risk of a counterparty failing to fulfil its obligations. Measurement and management of credit risk is conducted within the respective business units. |
