AFD_REGISTRATION_DOCUMENT_2017

CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH IFRS 6 Notes to the consolidated financial statements

6.2.6 Risk Information The role of the Executive Risk Department (DXR) is to analyse, inform and advise executive officers (General Management) on the risks to which the Group companies are exposed. It is involved in the implementation of risk policies and procedures and systems to measure, control, analyse and monitor these risks. It ensures that the Group’s activities, and the inherent risks, are in line with the risk management objectives, company policy P the Second Opinion unit, which provides a second opinion on projects which are being appraised, in accordance with Articleb112bof the Order of 3bNovember 2014; P the Permanent Control and Compliance Department (CPC); P the Group Risk Management Department (DRG). 6.2.6.1 Credit risk Risk measurement and monitoring AFD Group’s credit risk monitoring system is the responsibility of the Group Risk Management Department (DRG) within the Executive Risk Department. Operating as part of the DRG, the Credit Risk Evaluation division (DRC) is responsible for: P validating the credit risk due diligence carried out by the DOE, rating non-sovereign counterparties, determining the reporting groups and assessing the financial structure of the operations during the project appraisal cycle; P implementing the follow-up right beyond the bodies, when this right is requested by the Second Opinion unit, and reviewing the updated credit risk before agreements are signed and in the event of requests for temporary special dispensations or riders to the agreements; P half-yearly reviews of AFD’s non-sovereign credit risks and appraising the impairments; P developing tools, methods and training materials to evaluate credit risks, mainly for use by the operating departments. The Risk Monitoring Division (DSR): P monitors credit risk, mainly by ensuring the Risk Measurement Forms (RMF) are updated each half-year and keeping track of the limits; P monitors borrowers on the watchlist, impairments and provisions and application of the recovery and penalty procedures; P monitors the risk of the companies of AFD Group; P compiles the Group’s risk projections (portfolio, risk level, stress-tests); P conducts loss ratio studies for the purpose of analysis, collective provision allocation and determining the risk margins; P has the secretariat role for the Group Risk Committee (CORIS); and regulatory requirements. This department combines:

P reports to the executive officers on discussions about the risk situation, in collaboration with the other units responsible for monitoring Group risks; P develops risk management methods, tools and training materials. The Economic Evaluation and Public Policy department (ECO) , which reports to the Innovation, Research and Knowledge department (IRS), measures country risks (growth, stability of the financial system, public finances, the balance of payments, sociopolitical situation) and the credit risks of sovereign counterparties in the regions in which the Group operates (analysis of the structure and level of public debt, budget implementation, payment history and structural solvency indicators, etc.). Every six months, the Country and Sovereign Risks Committee (CORIS Pays) examines changes in the international financial and economic climate and in macroeconomic risks in the countries in which AFD operates and the credit risks reported by AMR agents. It validates the classification of country risk and sovereign risk. Each quarter, the Counterparty Risk Committee (CORIS Contreparties) examines the Group’s exposure in terms of the system of operational and regulatory thresholds, the Group’s major sovereign and non-sovereign risks, the borrowers on the watchlist, application of the recovery and penalty procedures, the quality of the portfolios, the impairments/provisions and cost of risk and the activity of the subsidiaries. The CORIS committees are chaired by the Executive Risk Director and their permanent members include General Management, the Executive Operations Director, the General Secretary, the Risk Management Manager at Proparco, the Director of DRG and the head of the Second Opinion unit. At Proparco, the Proparco Risks Division (DRI) is responsible for appraising and monitoring borrowers. The Group Risk Committee meets once a quarter after the CORIS Contreparties meeting. Its role is to conduct a regular review of the strategies, policies, procedures, systems, tools, risk positions, particularly credit risk, and thresholds, to notify the Board of Directors of its conclusions and to advise the latter on the The system of operational limits applies to the loans (outstandings and balances payable) which are not guaranteed by the French government, the guarantees granted and the equity stakes excluding market transactions and products which are backed by subsidies from the French government (e.g. micro- finance facility or Ariz Prime). It combines the exposures of AFD, Proparco and Fisea and weighs them according to instrument type and counterparty rating. In the area of loans exposing the Group to risk , we distinguish: P sovereign loans issued to, or guaranteed by, a foreign country. This type of loan may be eligible for debt restructuring as decided by the Paris Club; Group’s global risk strategy. System of operational limits

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REGISTRATION DOCUMENT 2017

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