AFD_REGISTRATION_DOCUMENT_2017

RISK MANAGEMENT

4

Risk management

4.3.4 Comprehensive interest rate, foreign exchange, liquidity and market risks Asset and liability management covers the management of liquidity, interest-rate and foreign-exchange risks as well as counterparty risk management for financial activities. AFD is responsible for financing the operations of its main subsidiaries and holds most of the Group’s asset and liability management risks on its balance sheet. The key components of AFD’s financial and asset and liability management strategy are submitted to the Board of Directors every year for approval. These components include: P limiting exposure to liquidity risk; P ensuring sustainable and steady interest revenue streams for AFD; P limiting exchange rate exposure to the minimum necessary for temporary operational needs; P limiting counterparty risk exposure from financial activities by carrying out market and investment operations with only the counterparties that have the highest credit ratings. Limits and management criteria are set based on guidance from AFD’s Board of Directors. In 2017, this body carried out the annual review of the system. 4.3.4.1 Liquidity risk Liquidity risk is described in Paragraphb6.2.6.2. 4.3.4.2 Interest rate risk Interest rate risk is described in Paragraphb6.2.6.3. 4.3.4.3 Foreign-exchange risk Foreign-exchange risk is described in Paragraphb6.2.6.4. 4.3.4.4 Market risk Market risk is described in Paragraph 6.2.6.6. 4.3.4.5 Counterparty risk Counterparty risk is described on 6.2.6.6. 4.3.5 Major risk ratio At 31 December 2017, AFD Group was in compliance with the major individual risk ratio set out by banking regulations, i.e ., a maximum of 25% of risk-based consolidated capital.

4.3.6 Other operational risks 4.3.6.1 Risk related to the settlement process AFD has established a number of measures to tighten up the organisation and control of settlements: P procedures which describe and formalise the processing of settlements; P pre- and post-settlement checks; P training and awareness-raising initiatives, primarily on the risks of fraud, for staff involved in settlement processing and checks. In terms of anti-money laundering measures, AFD uses commercial software that provides an automated system to cross-check settlement records against a list of persons and entities that require extra vigilance. 4.3.6.2 Legal risks The Legal department is responsible for managing the Group’s legal risks. It covers all legal areas (except for Human Resources and Taxes). The Legal department provides legal support: P in financing, guarantee and equity investment operations at all stages of the project cycle, including restructuring projects and disputes; P in cross-disciplinary matters (Group risk prevention, international government agreements, relationships with other donors, guarantee funds, partnerships, relationships with subsidiaries and companies in which AFD holds shares, and legal knowledge creation); P in market transactions; P in institutional matters (bylaws, governance, relationships with the government and supervisory bodies, legislative and regulatory development, agreements for various services); P regarding banking and finance regulations; P in criminal matters, on all subjects where AFD Group or its directors may be held liable; P by providing consulting services for all AFD entities. To AFD’s knowledge, there are no governmental, legal or arbitration proceedings, whether suspended or pending, that could have or have had a material effect on the financial situation or the profitability of AFD and/or AFD Group over the last 12bmonths.

76

REGISTRATION DOCUMENT 2017

www.afd.fr