ANNUAL REPORT 2011 - DONG Energy

RIsk AND RISK MANAGEMENT
Regulatory risks
regulatory conditions
Changes in regulatory conditions in both Denmark and abroad
are material to DONG Energy’s strategic opportunities and
thus also its future earnings. However, DONG Energy’s growing
international presence is reducing its dependence on regulatory
changes in the individual countries, such as changes to
subsidy schemes in connection with investments in wind generation
and changes to public regulation of electricity and gas.
DONG Energy’s presence in several stages of the value chain is
contributing to reducing the effects of regulatory changes in
individual stages of the value chain. Furthermore, DONG
Energy follows political and regulatory developments closely in
the countries in which this is relevant, and takes an active part
in connection with consultations on draft legislation and other
regulatory proposals that involve a risk of material changes.
tax regimes
Changed tax regimes may have a material effect on the
Group’s financial results, including in connection with oil and
Operational risks
Construction and operation of facilities
DONG Energy has a number of risks associated with the development,
construction, operation and maintenance of facilities,
and these risks cannot all be directly hedged. DONG
Energy continuously focuses on avoiding and preventing inexpedient
situations by means of inspection, improvement
of maintenance programmes and internal and external
checks of production equipment and facilities. A number of
insurance policies have been taken out to protect the value
of the assets, where possible. The subsidiary DONG Insurance
A/S was established to optimise the
insurance portfolio and is subject to supervision by the
Danish Financial Supervisory Authority.
Risk governance
Board of Directors
Audit and Risk Committee
Executive Board
Finance Committee
Risk management
Business areas
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manaGEmEnt’s rEviEw – DONG ENERGY GROUP ANNUAL ANNUAL REPORT REPORT 2011 2011
Group Risk Control
Mandates
gas extraction. DONG Energy’s tax risks are assessed and
managed on a continuous basis using the Group’s tax policy
and tax strategy. DONG Energy seeks open dialogue with tax
authorities and other public authorities and, wherever possible,
endeavours to obtain binding advance indications from
the authorities to clarify major tax-related risks. Because of
the Group’s international presence, DONG Energy maintains
a fair transfer pricing system based on OECD guidelines.
financial regulation
The financial crisis has led to a desire among European
regulators for a tightening of the rules on derivatives trading.
This has led to three strands of new regulations (EMIR,
MiFID and REMIT) that may have considerable implications
for DONG Energy in terms not only of tied-up funds but also
stricter capital requirements. DONG Energy follows developments
closely and continually analyses whether it is necessary
to adjust the current business model. The REMIT
Regulation came into force on 28 December 2011.
subcontractors
There are risks associated with the implementation of investment
projects, which may be delayed due to factors such as
delays in installation and transit vessels, commercial and
partner-related factors, breach of contract by suppliers and
subcontractors and, for wind farms, cable-laying. Moreover, a
large part of the equipment required is ordered in markets
that are often characterised by a high level of activity and
where competition may be limited. To mitigate these risks,
DONG Energy has acquired extensive internal knowledge
and expertise. By acquiring A2SEA and CT Offshore, the
Group has gained control of important expertise in installation
logistics related to the establishment of wind farms,
enabling the processes to be optimised.
The Board of Directors has the overall responsibility for
DONG Energy’s risk policy. To achieve transparent, efficient
risk management, DONG Energy has organised its risk
management in a number of decision-making bodies.
• The Audit and Risk Committee’s main risk management
role is to support the Board of Directors in its supervision
of the risk policy pursued.
• The Executive Board continuously assesses and adjusts
the internal control and risk management systems.
• The Finance Committee monitors the Group’s risks and
financing as well as the management of mandates relating
to market price risks.