Commercial, commodities and financial transactions expose Enel Group to the credit risk, defined as the possibility that an unexpected change in counter-party's credit rating, from which there is an exposure, generates a corresponding impact on the credit position, in terms of insolvency (default risk) or variation in the market value (spread risk).
The aim of the Enel's credit risk management department is to ensure the governance, at world wide level, of the Group's credit exposures, both at consolidated - portfolio level and at single legal entity/counter-party level.
Recent macro-economic evolutions, in light of the current instability in financial markets and the global economic crisis, have demonstrated that:
- the default (insolvency) of the counter-parties - financial, corporate and, at aggregated level, residential - could be an obstacle for a business wanting to hit its targets;
- the risks governance, and specifically credit risk, is a critical factor in the success of a business.
As such Enel decided to established a specific safeguard department that manages the Group's credit risk exposures.
The monitoring of credit risk exposures that come about through the daily activities of the main business areas is provided through the definition of methodologies, homogeneous at Group level, to quantify and control the risks. These methodologies, depending on the the characteristic of each counter-party segment, are based on internal ratings models (and also on benchmark external ratings) that use internal and market information on counter-parties to allow the estimation of the potential losses both at single counter-party and at portfolio level.
Monitoring activities include the analysis of the concentration risk defined as the risk arising from a single relevant exposure or group of exposures (by counter-parties or by sectors) that could potentially produce losses and have a significant impact on business operations.
In this sense, in light of the growing complexity on the energy markets, the credit and counterparty risk management concept is extended also to the measurement and monitoring of the risk arising from the Enel Group's relationships with strategic suppliers and partners in investment and business development projects.
In the credit and counter-party risk management activity, it's included also the analysis of the efficiency and efficacy of the risk mitigation techniques carried out by the Group (such as securities and guarantees). This case includes also the Enel Group's operations performed through the use of Export Credit Agencies or other agencies and institutions working for the protection of the commercial risk associated with investment plans and business development of the Group in foreign countries.