Credit Risk

Credit risk is defined as the risk that counterparties of the Group will not be able to meet their contractual obligations. The Management Board is responsible for credit risk management and compliance with policies that govern this area. The major body involved in realising credit risk management is the Credit Risk Committee. In 2014, the KGHM Group was exposed to this risk, mainly in four areas:

  • Credit risk connected with trade receivables. Credit risk exposure related to trade receivables is limited by evaluating and monitoring the financial standing of contractors, setting credit limits, and using debtor security. A receivables insurance contract was also signed – as at 31 December 2014, KGHM had 95 percent of its trade receivables secured. 
  • Credit risk related to cash and cash equivalents and bank deposits. Financial institutions’ credit ratings are analysed. The concentration of funds in individual institutions is limited. 
  • Credit risk connected to derivative transactions. The Group is not materially exposed to credit risk as a result of derivative transactions entered into.
  • Credit risk connected with loans granted. As at 31 December 2014, the balance of loans granted by the Group totalled PLN 6 231 million, or USD 1 777 million. These are long-term loans based on a fixed interest rate, granted by the KGHM INTERNATIONAL LTD. Group for the financing of a joint mining venture in Chile. Credit risk related to the loans granted is dependent on the risk connected with mine project advancement and is considered by the Group to be moderate.