AFD - 2019 Universal registration document

RISK MANAGEMENT

Risk management

4.3.4 Comprehensive interest rate, foreign exchange, liquidity and b 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 2018, this body carried out the annual review of the system. 4.3.4.1 Liquidity risk Liquidity risk is described in Paragraph Ǿ 6.2.5.2. 4.3.4.2 Interest rate risk Interest rate risk is described in Paragraph Ǿ 6.2.5.3. 4.3.4.3 Foreign-exchange risk Foreign-exchange risk is described in Paragraph Ǿ 6.2.5.4. 4.3.4.4 Market risk Market risk is described in Paragraph Ǿ 6.2.5.4.

The conversion of foreign currency transactions is performed by a specific module of the accounting software package, which publishes control reports at each step of the conversion and calculation of translation adjustments. A procedure describes the controls to be performed at each stage of the conversion treatment for the exchange positions until the determination of translation adjustments. An “Infocentre” application makes it possible to retrieve the accounting information for balances and accountingmovements for each transaction or at the desired aggregated level. In accordance with Article Ǿ 85 of the Decree of 3 Ǿ November Ǿ 2014, the audit trail allows the unitary event to be traced back to the accounting aggregate or, conversely, from the accounting aggregate to the corresponding unit events. In the case of a grouping of accounting movements within an upstream interface, the audit trail also makes it possible to retrieve the unit events that make up those grouping movements. In addition, all IT applications owned by the Regulatory Accounting Consolidation Department have IT security classification in terms of (i) Ǿ availability (availability required in the event of an extreme shock and current service availability), (ii) Ǿ integrity (capacity to prevent unauthorised modification of the information), (iii) Ǿ confidentiality (ownership of information that should not be available or disclosed to unauthorised individuals, entities or processes) and (iv) Ǿ proof (ability to identify the individual, entity or automated process from whom or which access to information originated). 4.3.3 Credit risk 4.3.3.1 Credit risk measurement and monitoring The system in place to measure and monitor credit risk is Thesystemofoperational limits isdescribed inParagraph Ǿ 6.2.5.1. 4.3.3.3 Management of major counterparty risk Monitoring the risks of sovereign counterparties is described in Paragraph Ǿ 6.2.5.1. 4.3.3.4 Monitoring the risks of non-sovereign counterparties The monitoring of the risks of non-sovereign counterparties is described in Paragraph Ǿ 6.2.5.1. described in Paragraph Ǿ 6.2.5 “Risk Information”. 4.3.3.2 System of operational limits

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UNIVERSAL REGISTRATION DOCUMENT 2019