AFD - 2019 Universal registration document

RISK MANAGEMENT 4 Risk factors

4.1.1.2 Geopolitical and macroeconomic risk Owing to the scope of its operations, AFD is exposed to the emergence of crises of political or geopolitical origin. This risk may take the form of any national or international political or administrative risks which could result in economic, commercial or financial losses for importers or exporters or businesses with investments overseas. As an illustration, the effects of contagion linked to regional conflicts (Middle East (1) or the Sahel (2) ) or the rise of protectionist trading policies (United States and China (3) or Brexit) fall into this category. Although this type of risk is, by nature, largely exogenous, in making operational decisions, AFD limits its operations in a given region based on the risk appetite framework relating to the risk of concentration (4) . Concentration risk is one of the main risks identified at AFD. It is managed using internal limits and through compliance with the regulatory ratio for major risks. The Group is required to systematically manage, measure, aggregate and control its exposure through a single counterparty or group of counterparties linked across all portfolios and activities.

The AFD Group systematically factors in this geopolitical and macroeconomic risk, on the one hand by its very nature in its Strategic Orientation Plan, but also through all sensitivity tests affecting its economic and financial model (ICAAP, ILAAP, PPR etc.) and particularly exercises to simulate the provisional cost of risk for the Group. However, the Group inevitably remains exposed to an exceptional situation that cannot be modelled which could involve the simultaneous emergence of a large number of high-intensity geopolitical crises in regions with significant activity. 4.1.1.3 Refinancing risk TheAFDGroup,includingitssubsidiaryProparco,doesnotreceive any repayable funds from the public. As its funding model is essentially based on medium and long-term market borrowings, liquidity is a priority in terms of the Group’s performance target, which involves keeping the cost of resources under control and minimising the carrying cost (5) . Changes to AFD’s condensed balance sheet are presented below. Most of AFD’s funding is from market borrowings.

Var. Balance sheet Sept. to Dec.

Acct 31/12/2017

Acct 31/12/2018

Acct 31/03/2019

Acct 30/06/2019

Acct 30/09/2019 31/12/2019

Var. balance sheet 1 year

In millions of euros

TOTAL ASSETS

40,922 44,958 45,817 46,326 47,663 47,850

2,893 2,592

188

Gross outstandings

32,241

35,736

36,301

36,169

37,099

38,328

1,229

(-) individual impairments

-446 151 778

-471 168 764

-485 273 784

-526 174 750

-528 277 754

-539 174 713

-68

-11

(+) accrued interest

6

-103

Investment portfolio Short-term cash assets

-52

-41

4,825

5,314

6,258

6,761

6,791

6,004

691

-787

Equity stakes at cost and in companies accounted for by the equity method

749 224 925

759 232 968

759 230 909 788

865 235

865 234

873 227

114

8

Fixed assets

-6

-7

Accruals and other assets IMF-PRGF transactions

1,148

1,387

1,313

345 -729

-74 -27

1,475

1,487

749

785

758

TOTAL LIABILITIES

40,922 44,958 45,817 46,326 47,663 47,850

2,893

188

Borrowings from French Treasury

1,375

1,703

1,703

1,703

1,943

1,943

240

0

Market borrowings Current accounts

29,052

32,378

33,982

34,218

34,721

35,156

2,778

435 138

454

394

383

351

332

470

75

Managed funds and government advances Accruals and other liabilities

76

826

843

880

1,104 1,877 1,291 5,448

904

78

-200 -192

2,041 1,195 5,040

1,488 1,204 5,331

1,358 1,238 5,331

1,621 1,250 5,448

1,685 1,327 5,448

197 122 116

36

Provisions

Provision retained earnings

0

Income FY

215

145

190 788

106 748

162 784

160 758

15

-1

1,487

-729

-26

IMF-PRGF transactions

1,475

(1) Exposure end-December 2019: €5 Ǿ billion (Egypt, Jordan, Lebanon, Turkey, Yemen). (2) Exposure end-December 2019: €1.2 Ǿ billion (Burkina Faso, Mali, Mauritania, Niger and Chad). (3) Exposure end-2019: €1.4 Ǿ billion (geography of project implementation) (4) Portfolio risk of a bank arising from its concentration on a single counterparty, sector or country. (5) The carrying cost of a resource is the difference between the cost of financing and interest from investing the resource.

80

UNIVERSAL REGISTRATION DOCUMENT 2019

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