Risk Management

In order to maximize the value created for shareholders and to ensure the sustainability of the Group companies manage potential deviations in strategic and financial targets in line with the Group’s risk taking approach by using corporate risk management principles.

At ATLAS Group, risks are managed by designated risk management officers (As independent consultancy) under the supervision of company Risk Committees (As independent consultancy) that report to the Board of Directors. Group companies determine potential risks, and list them in order of probability and the size of the loss they might cause. Prioritized risks are monitored by each company’s management, Risk Committee and Board of Directors with periodic reporting. Risk management processes that include the measures to be taken, are determined and their implementation and results are monitored. At the Group level, subsidiary financial, strategic, operational and compliance risks are also overseen and supervised by the relevant Strategic Business Unit and Finance department as well as the Compliance Management division.

ATLAS Group categorizes risks under these major headings:

Compliance Risks: Risks from legal penalties, and reputation loss and material damage that may arise in case of not complying with specified rules such as applicable laws, other legal regulations, code of ethics, company’s internal policies and directives, and the like. In order to support the Group subsidiaries to efficiently manage compliance risks within the determined framework, instructional activities are carried out by the Group’s Compliance Management Department.

Financial Risks: Risks that may arise as a result of the Company’s financial position and preference. Financial risks include those caused by loans, interest rates, FX rates, cash management, and commodity prices.

Within ATLAS Group, futures contracts are used against foreign currency exchange risk if necessary. Furthermore, in order to prevent any short term volatility that will be caused by FX risk in cash management, using loans in foreign currency for long term investment projects and sectors where it is possible to make foreign currency revenue, or revenue indexed to foreign exchange is preferred. Moreover, our investments are divided into phases and extended over a period of time.

In order to efficiently manage the interest risk of the subsidiaries, interest rates of financial institutions are tracked and Group companies are directed to those institutions that provide the more reasonable rates. Besides bank lending, support is given at the Group level to make use of corporate bond issuance.

To hedge against commodity price risks, Group companies either develop operational capabilities like dynamic pricing, or take other measures such as using operational or financial derivative instruments.

Strategic Risks: Structural risks may prevent a company from reaching its short, medium or long term goals. Risks arising from planning, business model, business portfolio, corporate governance and market analysis are considered to be strategic risks.

At the Group level, strategic risks are efficiently managed with a long term dynamic portfolio management approach. The main principle of ATLAS’s portfolio management strategy is to focus on sectors where it is possible to create competitive advantage and to use equities in fast growing, highly profitable and sustainable businesses. Activities are carried out at the Group level to diversify the portfolio according to such criteria as sectors, regions, customer profiles, technology, export, and the like.

Operational Risks: Risks that may arise due to the possibility of loss as a result of company activities and/or possibility of losses stemming from: (i) fault and negligence caused as a result of failures in a company’s control systems; (ii) company management and personnel not acting properly in terms of time and circumstances; (iii) managerial faults; (iv) faults and failures in information technology systems.

With the activities of the Audit Group, company processes and systems are controlled in order to determine and eliminate these risks.

Brand/Reputation Management Risks: These include: (i) company losing value as a result of not managing its name and commercial brands efficiently; (ii) decreasing demand in a company’s products and services because of damaged reputation caused by various incidents; (iii) company losing customers, profit and competitive strength. With a multi-discipline monitoring and management system, risks in the Group’s main assets, namely its brands and reputation, are monitored and managed by taking necessary actions.

Reporting Risks: These include: (i) false statements that do not comply with legislative requirements and reporting standards; (ii) not sharing sufficient information in the management reporting; (iii) not measuring and sharing key indicators effectively; (iv) deficiencies in the quality of the reports in terms of timing and detail. Reporting quality is monitored in the audits performed by the Audit Group and independent firms.

External Environment Risks: Risks based on external factors the company cannot control through its operations and management processes, such as natural disasters; political and economic developments in and outside the country; new decisions made by regulatory authorities in sectors where business activities are subject to public regulation; changes made in competition rules. While maximum measures are taken to eliminate risks, insurance coverage is also secured to cover risks under appropriate circumstances.

Audit Board

The Audit Board supervises the function and effectiveness of ATLAS Group’s accounting system, disclosure of financial information, independent audit, internal controls and internal audit. Selection of the independent auditor, preparation of the audit contract and all the stages of the work of the independent auditor are realized under the supervision of the Audit Board. The Audit Board held meetings in certain time periods in a year.