Risk management

Skilful identification of risks and implementation of preventive mechanisms are the foundations of an organisation's longevity.

Responsible development of PGE requires a multi-dimensional and multi-level risk management system.

PGE Group companies, like other entities from the energy sector, are exposed to risks and threats resulting from the specific nature of their operations and presence in specific market and regulatory & legal surroundings.

PGE S.A., as the Corporate Centre managing the Group, creates and implements integrated risk management architecture at PGE Group. In particular, it shapes PGE Group’s risk management policies, standards and practices, designs and develops internal IT tools to support these processes, specifies global risk appetite and adequate limits as well as monitors their levels.

In PGE Group risk management process is pursued based on the GRC (Governance – Risk – Compliance) model. It allows adaptation and integration of each of the operational areas at all levels of management.

Governance – Having established a Risk Committee at top executive level, which directly reports to the Management Board, supervision over the effectiveness of risk management processes is ensured across the entire Group.

Risk – Defining risk management functions within the Risk and Insurance Department makes it possible to independently analyse specific risks (ERM – Enterprise Risk Management, market, financial) and their impact on PGE Group.

Compliance – Establishing a compliance function guarantees that PGE Group operates in line with legal conditions and ensures the observance of internal norms, strengthens monitoring of the regulatory environment, whilst increasing successful identification of potential gaps.

Risk management also takes into account the three defence lines model, in which the risk counteracting process features the participation of risk owners at the operating level, Department of Risk and Insurance, Risk Committee and Department of Audit through independent periodical evaluations of key risk management system elements.

The PGE Capital Group has consequently developed a comprehensive risk management system. The Group measures and assesses risks in the key companies of the Group. Mechanism allowing identification of areas exposed to risk and risk level measurement methods are constantly verified and developed. Thanks to that, the significant risks concerning various areas of operations are identified and kept within the assumed limits by reducing negative effects of such risks and by taking preventive or corrective measures. All identified and assessed risks relating to the Group’s current activities are recorded in the risk register (risk books) maintained by the Risk and Insurance Department in PGE S.A.  Risk books reflect changes in the value of particular risk parameters along with information on implemented mitigating activities (reducing the probability of occurrence and minimising negative consequences of a risk).

Risk factors and mitigating actions

The table below presents the most significant risks identified in the PGE Capital Group together with their assessment until the end of 2021. A risk level indicates a risk’s potential financial impact on the Group’s results, and a risk prospect (trend) indicates the probable direction of risk development. The assessment of the described risks takes into account the impact of the COVID-19 pandemic on them, i.e. this fact is not analysed independently as a separate risk.

Risk level Mitigating actions
and main tools used for the management of the risk
Risk outlook in the next period
Low level Risk does not pose a threat and may be tolerated
Medium level Risk which needs preparation of the proper reaction based on analysis of costs and benefits
High level Intolerable risk, which needs immediate and active reaction, leading simultaneously to limitation of possible consequences and of probability of occurrence thereof

Risk level
Mitigating actions
and main tools used for the management of the risk
Risk outlook in the next period
Market and product risks

Related to prices and volumes of offered products and services

Gross margin on electricity from the production assets of the PGE Capital Group and on trading in related products – its amount results from the uncertainty as to the future levels and volatility of market prices (electricity prices and the prices of key energy products – CO2, fuels, including in particular hard coal, gas and the prices of certificates).


  • Optimization of generation assets – definition of production scenarios for updated market parameters of electricity, CO2 and fuels.
  • Using consistent guidance in respect of process organisation in the context of commercial strategy and mid-term planning (strategy for hedging key exposures in the area of electricity and related product trading that correspond to the adopted risk appetite in the mid-term).
  • Establishing position hedging levels with consideration given to the results of analysing pricing risk in respect of electricity and related products, VaR-based. Target hedging levels are specified taking into consideration the Group’s financial standing, including in particular its strategic objectives.
  • Monitoring exposures for individual areas in relation to the set limits and hedging strategies defined by the Risk Committee or the Management Board of PGE S.A. through operational reports prepared by the Risk Area of PGE S.A.
  • Research, monitoring and analysing the electricity markets and sector trends in order to optimally use generation and selling capacities.
  • Acquiring new customers – diversification of channels to reach final off-takers and diversification of target groups by maintaining an extensive product portfolio and adapting offering to market.
  • Current clients retention – a diversified portfolio of customer loyalty schemes and client-acquisition activities and special offers dedicated to former clients who moved over to the competitors.
  • Care for a high level of customer service by developing employees’ competences and building relations with business and retail clients.
  • Use of tools to supporting customer relations processes allows the Group better sales planning and organisation of sales.
  • Using the administrative appeal path provided for in the Energy Law and the Code of Civil Procedure.
  • Conducting lobbying activities within the framework of the proceedings conducted before the CJEU.
  • Ensuring the highest level of operational readiness of the individual capacity market units.
Electricity sales volumes – this risk derives from uncertainty related to the development of macroeconomic indicators affecting the demand for electricity and energy goods, including in the context of the impact of the COVID19 pandemic and the remedial actions taken
Tariffs (regulated prices) – resulting from the requirement to approve rates for distribution services and electricity and heat prices for particular groups of entities.
The Capacity Market – resulting from uncertainties related to withholding of payments from the capacity market and threats related to compliance with the capacity obligations of capacity market units

Risk level Mitigating actions
and main tools used for the management of the risk
Risk outlook in the next period
Property risks

Related to development and maintenance of the assets

Failures and damage to property –  connected with the operation and degradation over time of energy equipment and facilities and protection of energy equipment and facilities against destructive external factors ( including fire, effects of weather phenomena, intentional damage).
  • Diversification of the current structure of the production sources,  Introducing a technology reducing the negative impact of atmospheric factors.
  • Active pursuing of a strategy for building up and modernization of the production capacities.
  • Performing maintenance repairs in line with the highest sector standards.
  • Insurance of the most important production assets in the event of breakdown and property damage. Assets are insured based on an analysis of insurance costs,  capabilities of insurance markets for specified risks or for particular types of assets, costs related to asset replacement and potential lost revenue.
  • The reliability of the power supply to the end users has been systematically improved through modernization of the distribution grid.
  • Monitoring continuously environmental laws and regulations and the energy policy.
Investment and development – connected with strategic plans for expanding the generation, distribution and sales potential as well as on-going investments.

Risk level Mitigating actions
and main tools used for the management of the risk
Risk outlook in the next period
Operational risks

Related to pursuing of ongoing economic processes







Electricity and heat production –  connected with production planning and impact of the factors that determine production capacities.
  • Optimisation of equipment lifecycles and the availability of key assets.
  • Timely inspections, repairs and modernisation of the existing assets.
  • Optimisation of costs inter alia through monitoring of fuel prices and reserves and securing supply through long-term contracts with suppliers and through price fixing formulas.
  • Monitoring of legal changes and changes in technical standards in the field of by-products.
  • Investments in improving the efficiency of the combustion process.
  • Constant monitoring of service availability using the Service Monitoring System.
  • Creating Business Continuity Plans for critical systems, developing and testing emergency procedures.
  • Adaptation to the requirements of, among others the Act on the National Cybersecurity System, preparation for the implementation of the ISO 27001 system.
  • Ongoing monitoring of changes in legal regulations.
  • Training in regulations preventing money laundering and terrorist financing.
  • Requirement to read Best Procurement Practices and the Code of Conduct for Business Partners of PGE Group companies.
  • The approval path and internal regulations concerning the purchasing process.
  • Control of the work environment.
  • Training of employees in the field of occupational health and safety.
  • Informing about threats, restrictions and rules related to the COVID-19 (dedicated tab on the Intranet).
  • Conducting an intensive and effective dialogue in order to avoid escalation of potential disputes with the social partners and to work out the most favourable solutions with regard to employment and employment costs within PGE Capital Group connected therewith.
  • PGE Group’s active participation in internship programmes and cooperation with educational institutions in order to secure a pipeline of qualified personnel.
  • Assessment and training of personnel in order to make optimal use of it within the Group’s structures.
Fuel management  –  connected with uncertainty regarding the costs, quality, timeliness and volumes of fuel supply (mainly coal) and production raw material as well as the effectiveness of inventory management processes.  

By-products and services – related to the management of production waste
Cybersecurity – understood as intentional disruption of generation and distribution assets and IT systems used at PGE Group.
Procurement – related to the effectiveness and correctness of the purchasing process.
Employee safety – related to ensuring safe working conditions.
Human Resources  –  pertaining to provision of personnel with the relevant experience, competences and ability to perform specific tasks.
Social dialogue –  related to the failure to reach an agreement between the Group’s management and the social partners, which could lead to strikes / collective disputes.

Risk level Mitigating actions
and main tools used for the management of the risk
Risk outlook in the next period
Regulatory and legal risks

Related to compliance with external and internal legal provisions




Legal changes in support systems – connected with uncertainty as to the future shape of the support system for production of certified energy.
  • Monitoring of the changes being introduced or proposed provides that our operations in key business segments are carried in compliance with the law and that PGE Capital Group has solutions which take into account potential changes in the legal environment.
  • Social dialogue and advertising campaigns.
  • Exercising operational supervision of planned and ongoing investment and modernisation measures with respect to their compliance with environmental requirements.
  • Monitoring environmental laws and regulations in the context of the work on the new BAT conclusions on waste management and participating actively in the legislative process.
  • Active participation of PGE S.A. as the member of the Polish Electricity Committee that opened its office in Brussels. Through the Committee’s operations, the Company actively influences proceeding and shaping of EU law and engages a dialogue with the EU institutions.
  • Adaptation of internal regulations and practices to make sure that the activities are in compliance with the power sector regulations and binding law.
  • Improvement of activities aimed at protecting and improving the state of the environment by implementing technological and organisational solutions ensuring efficient and effective management in this area.
Environmental protection – resulting from industry regulations specifying which „environmental” requirements energy installations should meet and what the principles for using the natural environment are. The future environmental regulations and uncertainty concerning their final shape (in particular with regard to the revision of BAT / BREF) may translate into a change in the level of capital expenditures of the PGE Group.  

Concessions – resulting from the statutory requirement to hold concessions with regard to conducted operations.
Taxes – related to uncertainty surrounding the future shape of tax regulations and their interpretation.

Risk level Mitigating actions
and main tools used for the management of the risk
Risk outlook in the next period
Financial risks

Related to finance management







Credit riskconnected with the counterparty default, partial and/or late payment of receivables or a different type of breach of contractual conditions (for example failure to deliver/collect goods or failure to pay for any associated damages or contractual penalties).
  • Prior to executing a transaction, a counterparty assessment is carried out and forms a base for applying  credit limits, that are regularly updated and monitored. Exposures that exceed established limits are hedged in accordance with the Group’s credit risk management policy. The level of utilisation of limits is monitored on a regular basis, payment of receivables is monitored on an ongoing basis and early recovery procedures are in place.
  • Applying a central financing model, which assumes – as a rule – that external capital is raised by PGE S.A. PGE Group subsidiaries use a variety of intra-group financing sources and liquidity risk is monitored using periodic planning for operating, investing and financing activities.
  • As regards currency risk and interest rate risk, PGE Group has implemented internal management procedures. PGE Group companies execute derivative transactions involving interest rate- and/or currency-based instruments (IRS, CCIRS) only in order to hedge identified risk exposures. Regulations in force at the PGE Group do not allow, with regard to derivative transactions based on interest rates and currencies, to enter into speculative transactions, i.e. transactions which would be aimed at generating additional gains resulting from changes in the level of interest rates and changes in exchange rates, while exposing the Company to the risk of incurring a potential loss on this account.
Liquidity riskconnected with the possibility of losing the ability to meet current liabilities and obtaining financing sources for business operations.
Interest rate riskresulting in particular from the negative impact of changes in market interest rates on PGE Group’s cash flows generated by floating-rate financial assets and liabilities.
Foreign exchange riskunderstood in particular as risk that PGE Group’s cash flows denominated in currencies other than the functional currency are exposed to due to negative exchange rate movements.

Climate risks

Among the 10 most significant risks in the scale of the entire PGE Group is the climate risk related to ensuring an appropriate level of environmental protection.

PGE-circular-ENG-07 PGE-circular-ENG-07

Map of long-term risks: Scenario where the coal portfolio stays within PGE Group

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PGE Group analyses climate-related risks in the context of the impact of climate change on its business activities and the impact of its business activities on climate change. The business activities conducted by PGE Group have a material impact on the environmental. The analysis of related risks, identification and continuous improvement of both pro-environmental solutions and monitoring measures allow the Company to effectively manage and minimise its environmental impact and simultaneously to safeguard PGE Group’s financial results. Solutions developed by PGE Group facilitate its development and sustainable transition in line with climate requirements and the interests of all stakeholders. In the context of climate risk, PGE analyses issues related to the legality of its operations. This relates primarily to issues related to the fulfilment of environmental requirements applicable to PGE Group companies’ operations and resulting from the necessity to obtain concessions. As part of the risk management process, a distinct group of risks related to compliance has been separated, which is subject to additional analytical and reporting requirements.

In 2020, risks arising from the possibility of failing to meet environmental requirements and risks associated with obtaining and maintaining mining concessions were assessed as the most significant to the Group and were referred for in-depth analysis.

When analysing risks, PGE does not focus only on their negative aspects, but also treats them as challenges and takes advantage of opportunities which may arise from changes.

Such an approach allows PGE Group to respond actively to dynamically changing conditions in which it operates, as well as to build and strengthen its market position.

Strategic opportunities

When analysing the risks in terms of threats for PGE, we also try to identify opportunities provided by the on-going changes. Early preparation for incoming changes provides an advantage towards competitors and allows for the Group’s development. In this context, we are especially monitoring the technological processes by becoming their active participants. Effective implementation of technological solutions should contribute to a more effective administration of the group’s resources in the entire value chain. In this scope, the progressing digitalisation will lead to PGE’s offering of products and services that are more adapted to the customers’ needs, which can be reflected in the entire value creation chain.

Thanks to dedicated investment support aimed at developing specific production sources (such as RES or co-generation), PGE can effectively change electricity or heat energy production technologies, in terms of investment expenses, and thus reduce the level of exposure to such factors as prices of emission allowances or fuel.

We consider energy transformation not only as a risk, but as a development opportunity for the organisation. The main identified opportunities are:

The PGE Group will be a pioneer in the development and operation of offshore wind assets in Poland. The implementation of the investment will enable obtaining stable revenues thanks to a dedicated support scheme and building the Group’s generation potential.

The PGE Group is implementing an ambitious photovoltaic development program, aspiring to achieve 1 200 MW of installed photovoltaic capacity by 2024 and> 3.0 GW of new capacities by 2030. Development will take place on the basis of a support system and long-term contracts, which will guarantee the expected rate of return and secure revenues from the sale of electricity in the long term. It will also enable the development of the Group’s production portfolio and its diversification.

The energy transformation towards dispersed sources, including prosumers, and the dynamisation of the energy market requires additional investments in distribution networks, including intelligent infrastructure. Investments implemented in the tariff model should allow PGE to increase the share of regulated revenues, which is desirable taking into account the need to raise capital for development and building a financially stable organisation.

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