Governance and corporate governance risks

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Risks related to TAURON Group’s sustainable development are classified in accordance with the Risk Model adopted by TAURON Capital Group. Based on that the following risk categories have been identified:

  1. Legal risk presented in section Governance and corporate governance risks
  2. Compliance risk presented in section Governance and corporate governance risks
  3. Purchasing process risk presented in section Governance and corporate governance risks
  4. Risk related to climate change presented in section Climate and environmental risks and opportunities
  5. Environmental risk presented in section Climate and environmental risks and opportunities
  6. Social risk presented in part Risks related to social capital management ​
  7. Human capital management risk presented in section Human Capital Related Risks
  8. Internal communications risk presented in section Human Capital Related Risks
  9. Work Health and Safety (WHS) risk presented in section Human Capital Related Risks

Each of the risks is also assigned a trend and a materiality level, as indicated below:

Legal and regulatory risk

Table below presents the Legal Risk identified at TAURON Capital Group. In accordance with the Risk Model adopted by TAURON Capital Group, the Legal Risk is classified in the category: Operational risk/Environment (stakeholders), while the Regulatory Risk is classified as a separate category.

Legal Risk identified at TAURON Capital Group

# Risk name Risk description Trend and risk materiality Response to risk
1. Legal Risk Risk related to the non-compliance with the legal regulations, wrong interpretation of the new laws and regulations, requirements imposed by the regulator and the oversight authorities. The consequences of the materialization of risk may include financial penalties, criminal and civil law liability, damage to the Group’s image.
  1. Continuous monitoring of the regulatory environment and changes to the legal regulations, including social issues, respect for human rights, anti- corruption, environment protection and employee issues.
  2. Implementation of the required changes to the internal and intra- corporate regulations.
  3. Establishing working groups to prepare and implement the changes required due to the legal environment.
  4. Continuous cooperation with the authorities performing oversight of the energy market and the capital market.
  5. Consultations with the organizational units with respect to the planned key regulations in the area of compliance.
  6. Employee training with respect to the knowledge of the legal regulations and the internal regulations.
2. Regulatory Risk The possibility of incurring a loss or gaining a benefit due to the planned or unplanned changes to the existing Regulations or the enactment of the new Regulations that may have an impact on TAURON Group’s operations (at the national and European levels).
  1. Continuous monitoring of the regulatory environment and changes to the legal regulations.
  2. Active participation in the consultations with respect to the planned regulations (industry organizations, government agencies).

Compliance Risk

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Table below presents the Compliance Risk identified at TAURON Capital Group. In accordance with the Risk Model adopted by TAURON Capital Group, the Compliance risk is classified in the category: Operational Risk/Compliance Risk.

Compliance Risk identified at TAURON Capital Group

# Risk name Risk description Trend and risk materiality Response to risk
1. Internal abuse (fraud) risk Risk related to the appropriation or use of the Company’s assets, its devastation, theft, use of official position for personal gain resulting in financial losses, penal and administrative sanctions, criminal and civil law liability.
  1. Education and training activities among employees, including mandatory e-learning training with respect to the values and standards defined, among others, in TAURON Group’s Corporate Social Responsibility Code of Conduct.
  2. Effective functioning of the whistleblowing system in the organization, enabling TAURON Group’s employees to report potential cases of fraud (abuse) to their direct superior, the Ethics Committee, the Compliance Officer/Compliance Coordinator, or via the abuse (fraud) notification (reporting) form available at http://www.tauron.pl/.
  3. Conducting of fact finding investigations by the Compliance Officer or Compliance Coordinators.
  4. Building an organizational culture based on TAURON Group’s values and policies (principles).
  5. Implementation of TAURON Group’s Anti-Corruption Policy.
  6. Applying of the principles stemming from TAURON Group’s Corporate Social Responsibility Code of Conduct.
  7. Implementation of the provisions of TAURON Group’s Rules for accepting and giving gifts.
2. External abuse (fraud) risk Risk related to an occurrence of external abuse (fraud) that affects the operations of TAURON Group through: disclosure of information to unauthorized persons, loss of information, commercial espionage, terrorist assault and hacker attacks, tax fraud, theft, vandalism, counterfeiting, dirty money laundering.
  1. Raising employee awareness through training and information campaigns on the existing threats of external abuse (fraud), including the Compliance Management System in place at TAURON Group.
  2. Implementation of the provisions of the Code of Conduct for Contractors (Counterparties) of TAURON Group’s Subsidiaries.
  3. Implementation of anti-corruption clauses in the contracts with the contractors (counterparties).
  4. Implementation of the provisions of TAURON Group’s Anti-Corruption Policy.
  5. Effective use of the whistleblowing system in the organization, enabling reporting of potential cases of abuse (fraud), the system also allows for reporting of abuse (fraud) by the external entities through the abuse (fraud) reporting form available at http://www.tauron.pl/.
  6. Monitoring the cooperation with the contractors (counterparties) and checking (vetting) their credibility at TAURON Group.
  7. Promoting best practices, improving procedures, conducting training courses and applying TAURON Group’s Corporate Social Responsibility Code of Conduct, Code of Ethics and functioning of the abuse (fraud) reporting (whistleblowing) system.
  8. Building and spreading an organizational culture based on TAURON Group’s values and principles.
3. The risk of unethical behavior and mobbing The risk includes the occurrence of unethical behavior resulting, in particular, in a lack of cooperation, bad atmosphere in the team, mobbing, harassment, insults, discrimination of employees.
  1. Developing an organizational culture based on TAURON Group’s values and principles.
  2. Conducting information activities in order to familiarize the employees with TAURON Group’s standards of conduct and corporate values defined in TAURON Group’s Corporate Social Responsibility Code of Conduct, TAURON Group’s Respect for Human Rights Policy, TAURON Group’s Policy of Compliance with the Principles of Ethics and Counteracting Mobbing and Discrimination.
  3. Promoting knowledge with respect to the principles of social coexistence, moral standards and principles of equity adopted for use in the society.
  4. Raising employee awareness through training and information campaigns on ethical behavior.
  5. Effective use of the whistleblowing system in the organization, enabling reporting of potential cases of abuse fraud, the system also allows for reporting of abuse (fraud) by the external entities through the abuse (fraud) reporting form available at http://www.tauron.pl/.

Purchasing Process Risk

Table below presents the Purchasing Process Risk identified at TAURON Capital Group. In accordance with the Risk Model adopted by TAURON Capital Group, the Purchasing Process Risk is classified in the category: Operational Risk/Customers and Contractors (Counterparties).

Purchasing Process Risk identified at TAURON Capital Group

# Risk name Risk description Trend and risk materiality Response to risk
1. Purchasing Process Risk Risk related to the purchasing proceedings conducted, their erroneous implementation, unplanned increase in the purchase costs (budget overruns), taking into account methods employed to prevent violation of human rights by business partners, counteract corruption and abuse in the purchasing process as well as ensure compliance with the ethical and moral standards during the implementation thereof. The consequences of the materialization of the risk include unfavorable purchase agreements, the need to cancel the tender proceedings, damage to the image of TAURON Capital Group and a loss of credibility with the stakeholders. Risk of a lack of environmental and climate responsibility on the supply chain side.
  1. Implementation of the provisions of the Code of Conduct for the Contractors (Counterparties) of TAURON Group’s Subsidiaries.
  2. Applying of TAURON Group’s Anti- Corruption Policy.
  3. Applying of anti-corruption clauses in the contracts with the contractors (counterparties).
  4. Implementation of the Respect for Human Rights Policy.
  5. Standardization of the principles (rules) of conducting proceedings in the purchasing process and the transparency thereof.
  6. Developing lasting relationships with the contractors (counterparties) based on trust and mutual respect.
  7. Expecting the contractors (counterparties) to comply with the legal regulations, ethical standards and good commercial practices, including work health and safety rules, principles of discrimination and unequal treatment, respect for human rights and dignity of employees, transparent personnel policy, environment protection, fair competition, prevention and countering of fraud, as well as information security and protection.
  8. Applying of the standard contract forms (drafts, templates) and standard clauses in the contracts regarding compliance with human rights by TAURON Capital Group’s business.
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