Euronext - 2019 Universal Registration Document
Risk Management & Control Structure
Control Structure
Risk Control & Mitigation Market Risk
Liquidity Risk The Group’s policy is to ensure that cash, cash equivalents and available bank facilities allow the Group to repay its financial liabilities at all maturities, even disregarding incoming cash flows generated by operational activities, excluding the related party loans granted by the Group’s subsidiaries to its Parent. Cash, cash equivalents and short-term financial investments are managed as a global treasury portfolio invested in non-speculative financial instruments, readily convertible to cash, such as bank balances, money market funds, overnight deposits, term deposits and other money market instruments, thus ensuring a very high level of liquidity available at any time. Credit Risk The Group limits its exposure to credit risk by rigorously selecting the counterparties with which it executes agreements. Most customers of the Group are leading financial institutions that are highly rated. Investments of cash and cash equivalents in bank current accounts and money market instruments, such as short-term fixed and floating rate interest deposits, are governed by rules aimed at reducing credit risk: maturity of deposits strictly depends on credit ratings, counterparties’ credit ratings are permanently monitored and individual counterparty limits are reviewed on a regular basis. In addition to the intrinsic creditworthiness of counterparties, the Group’s policies also prescribe the diversification of counterparties (banks, financial institutions, funds) so as to avoid a concentration of risk. Derivatives are negotiated with leading high-grade banks. For further details on financial Risks Please refer to the Notes to the Financial Statements in particular Note 37 of this Universal Registration Document.
2.2 Control Structure RISK APPROACH AND INTERNAL CONTROL OBJECTIVES Euronext is dedicated to building a pan-European market infrastructure and powering capital markets to finance the real economy, while delivering value to shareholders. In order to execute our ambitions Euronext is committed to preserving a balance between achieving our strategic ambitions and ensuring operational excellence. In order to achieve our ambitions and preserve favorable conditions for the Company to fulfill its mandate Euronext has adopted the Enterprise Risk Management (ERM) framework. Enterprise Risk Management framework is designed and operated to identify potential events that may affect the Company, assess risk to be within the defined guidelines, manage the risk through control mechanisms, and monitor the risk to understand the evolution. Euronext embeds the riskmanagement philosophy into the Company culture, in order to make risk and opportunity management a regular and everyday process for employees. The Supervisory Board and Managing Board regard ERM as a key management process to steer Euronext and enable management to effectively deal with risks and opportunities. Following the issuance of the fixed-rate bond (in 2018), the Group entered in a swap strategy to hedge the interest rate risk related to the bond. Following the issuance of the second bond (with 10Y maturity) in 2019 the Group has an exposure to interest rate risk. This interest rate risk is, however, deemed to be low as the Group is unlikely to refinance this bond at the early stage of its lifetime. Most operating revenue and expenses in the various subsidiaries of the Group are denominated in the functional currency of each relevant subsidiary. The Group may use derivatives instruments designated as hedge of net investment or foreign denominated debt to manage its net Investment exposures. The decision to hedge the exposure is considered on a case by case basis since the Group is generally exposed to major, well established and liquid currencies. The Group would, by the same token, hedge transaction risk arising from cash flows paid or received in a currency different from the functional currency of the group contracting entity on a case by case basis. Capital Risk The Group has a policy that provides a framework to ensure that it maintains the required capital levels. In addition, each of the Group’s subsidiaries that is an operator of a regulated market and subsidiaries that are investment firms are subject to regulatory capital requirements relating to their general financial soundness, which include certain minimum capital requirements. The Group ensures that each regulated subsidiary maintains sufficient level of capital and liquid assets in order to comply with the capital requirements.
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ERM FRAMEWORK The objectives and principles for the ERM process are set forth in the Company’s ERM Policy. The ERM process is based on best practices regarding the Internal Control and Enterprise risk management, including the Committee of Sponsoring Organisations of the Treadway Commission (“COSO”) initiative. It uses a bottom-up and top-down process to enable better management and transparency of risks and opportunities. At the top, the Supervisory Board and Managing Board discuss major risks and opportunities, related risk responses and opportunity capture as well as the status of the ERM process, including significant changes and planned improvements. The design of the ERM process seeks to ensure compliance with applicable laws and regulations with respect to internal control and risk management addressing both subjects in parallel.
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2019 UNIVERSAL REGISTRATION DOCUMENT
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