Objective of risk management

Risk management in the PZU Group aims to build value for all stakeholders by actively and deliberately managing the quantum of risk accepted. The essence of this process also involves preventing the acceptance of risk at a level that could pose a threat to the financial stability of the PZU Group or the financial conglomerate.

Risk management in the PZU Group is based on analyzing risk in all processes and units and it is an integral part of the management process.

The main elements of the PZU Group’s risk management system have been implemented to ensure sectoral consistency and the execution of the various entities’ strategic plans and the overall PZU Group’s business objectives. They include the following:

• systems of limits and limitations on the acceptable level of risk, including the level of risk appetite;
• processes involving the identification, measurement and assessment, monitoring and controlling, reporting and management measures pertaining to various risks;
• allocation of powers in the risk management process, in which the Management Boards and Supervisory Boards of the entities and dedicated Committees play a crucial role.

In addition, financial sector entities are obligated to apply the appropriate standards for a given sector. The adopted internal regulations specify among others:

• processes, methods and procedures facilitating risk measurement and management;
• split of duties in the risk management process;
• scope and conditions and the frequency of risk management reporting.

PZU exercises supervision over the PZU Group’s risk management system on the basis of mutual cooperation agreements entered into with other Group entities and the information provided thereunder. It manages risk at the PZU Group level on an aggregate basis, especially with respect to capital requirements.

Additionally, the PZU Group has in place processes to ensure the effectiveness of risk management at the PZU Group level. The risk management rules applicable to the PZU Group’s subsidiaries include a recommendation issued by PZU (the parent) regarding the organization of the risk management system in insurance sector and banking sector subsidiaries. Additionally, guidelines regulating the various risk management processes in the PZU Group entities are also issued from time to time.

The management boards of PZU Group entities are responsible for fulfilling their own duties in accordance with the generally applicable provisions of national and international law. In particular, they are responsible for the implementation of an adequate and effective risk management system.

Supervision over the risk management systems in the various financial sector entities is exercised by supervisory boards. PZU designates its representatives to the Supervisory Boards of its subsidiaries, including in particular the Alior Bank and Bank Pekao.