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The Company's risk management system has the objectives of identifying and analyzing risks to the Company, establishing appropriate risk limits and controls and monitoring risks and compliance with established limits, but without unduly affecting the competitiveness and flexibility of the Company.

The risks faced by the Company are as follows:

a. Credit risk

Credit risk is the risk of financial loss when a customer of the Company defaults on its obligations. Credit risk is managed primarily by establishing policies for extension of sales credit. Concerning financial assets recognised in the financial statements, the maximum credit risk exposure is the recorded value.

b. Market risk

Market risk is the risk incurred when the fair value of the future cash flow of a financial instrument fluctuates due to changes in market prices reflecting interest rate risk and currency risk.

c. Liquidity risk

Liquidity risk is the risk arising, among others, from inability of the Company to settle obligations when due and payable.

d. Operational risk

Operational risk is the risk of loss caused by inadequacy or failure of internal processes, human factors and systems or due to external events. This is an inherent risk in all the business processes, operational activities, systems and products of the Company.

In 2018, the Company's risk management system functioned well, but the Company continued its efforts to put risk limits and controls in place to improve competitiveness by spreading risks, avoiding risks, reducing levels of risk through the internal control system or accepting existing risks.