INTEGRATED
REPORT
2019

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Risk Management

GRI indicators:
Capitals:

In the course of its business, the ORLEN Group conducts ongoing monitoring and risk assessment and undertakes actions aimed at minimizing its impact on the financial situation.

GRI:
  • 102-15
  • 103-1
  • 103-2

Enterprise Risk Management System

In 2019, the organisation and underlying principles of the Enterprise Risk Management System did not change relative to the previous year. Based on its Enterprise Risk Management Policy and Procedure, the ORLEN Group monitors and assesses its risk exposures on an ongoing basis and takes steps to minimise their impact and reducing probability of occurrence.

As required by these regulations, the Financial Control, Risk Management and Compliance Office was established at PKN ORLEN to coordinate the enterprise risk management (ERM) processes across all levels of the organisation. Management boards at each ORLEN Group company are responsible for risk management at individuals companies.

The Enterprise Risk Management System is a tool used to support effective delivery of the ORLEN Group’s strategic and operational objectives. It ensures information identification about identified risks and support effective management for those risks.

Key roles in the Corporate Risk Management System

Infografika-Orlen-2020-129 (1) Infografika-Orlen-2020-129 (1)

Risks are assessed regularly by individual business areas of PKN ORLEN S.A. and the ORLEN Group as part of their self-assessment and risk controls testing. The key objective is to ensure that risk estimation is up to date, and that the risk controls are validated for adequacy and effectiveness. Process and risk owners and in charge of the assessment, based on their positions and remits.

In the risk asessment, the materiality of each risk is determined under three scenarios:

  • where there are no risk-specific controls in place (gross risk assessment);
  • where the existing risk-specific controls are in place (net risk assessment). The net risk assessment requires testing relevant risk mitigating controls, in line with the guidelines adopted by the Company as part of the ERM Procedure, prepared in accordance with the ERM Policy adopted by the Company’s Management Board;
  • where the risk is at a desired (acceptable) level – target risk assessment.

Once the risk assessment and risk controls testing processes are completed, the Company’s Management Board and Supervisory Board receive a report highlighting the material risks.

Risks at PKN ORLEN S.A. and other ORLEN Group companies are defined based on a common model, and further detailed at the level of individual business processes or strategic objectives.

In 2019, as part of an annual risk self-assessment process and risk controls tests at PKN ORLEN, 552 risks were assessed based on tests of 999 control mechanisms in 176 business processes. The ORLEN Group companies evaluated 633 risks and 1 807 control mechanisms in 169 processes.

In 2019, the ERM system covered the following entities: PKN ORLEN S.A., Anwil S.A., Grupa ORLEN Lietuva, Grupa Unipetrol, ORLEN Deutschland GmbH, ORLEN Paliwa Sp. z o. o. and ORLEN Centrum Usług Korporacyjnych Sp. z o. o.

In the Enterprise Risk Model adopted by the ORLEN Group, all identified risks are classified into the following categories:

  1. STRATEGIC RISKS – directly related to strategic objectives, specific actions and performance indicators.
  2. PROJECT RISKS − events or circumstances which, if they materialise, may have an adverse effect on one or more project objectives. These risks are subject to ongoing assessment during project implementation.
  3. PROCESS / OPERATIONAL RISKS – identified in the ordinary course of business; their identification facilitates effective process management. These risks are assessed by business owners annually in a self-assessment process.

Risks and processes classification along with control mechanisms within the ERM functioning

Strategic

Risks / processes Risk description Risk mitigation method
STRATEGIC
Assumptions
  • inconsistent and unrealistic strategic goals and assumptions
  • change of strategic goals/assumptions during the process
 Systematic review of the key strategic goals to check if they are up to date and their ongoing monitoring against the changing environment (regulations, market, key suppliers, etc.)
Division of competences
  • inappropriate division of competences between the organisational units
  • no decision-making centre
 High degree of employee specialization, appropriate assignment of duties and responsibilities by developing precise scopes of tasks.
New regulations
  • entry into force of unfavourable legal regulations
  • no effective action of the public administration in relation to enforcement of the law
 Participation in public consultations for legislative drafts reducing the risk of unfavourable regulations.
Accidents at work and other threats
  • insufficient knowledge about work safety among contractors
  • threats to work safety and fire safety related to the presence of third-party employees on the ORLEN Group’s premises
 Supervision and management of contractors’ work by implementation of tools to monitor work safety.
Providing appropriate mechanisms for continuous monitoring of threat and risk assessment
Implementation of uniform requirements for contractors and subcontractors in line with the guidelines set forth in the ‘ORLEN Group Safety Standard no. 9’.

Project

Risks / processes Risk description Risk mitigation method
PROJECT
Budget overrun
  • inappropriate estimate of the project implementation costs
  • absence of including cost of additional work in project
  • unplanned costs arising during the implementation of the project
 Current monitoring of the contractor’s activities and potential delays in project realization. Systematic cost verification vs. planned budget.
Schedule overrun
  • inappropriate assumptions concerning the project completion time
  • underestimating the deadlines for completing the work carried out under the project
 Constant supervision over the performance of the work in progress, systematic evaluation of the progress of implementation of successive stages of the project and enforcement of performance of the work.
Project scope modification
  • incomplete performance of the project
  • exceeding the project framework/scope
  • lack of including all project work
  • extending the scope of the project with additional works
 Systematic analysis of the environment in which the project is being implemented. Depending on the circumstances arising, potential decision to change the scope of its implementation. Verification of planned and implemented works included in the scope of the project.
Division of competences
  • inappropriate division of competences between the organisational/substantive units involved in the project
  • unavailability of key decision makers
 Preparation and implementation of methodology concerning competency division of project team members in order to avoid conflict of interests. Appropriate allocation of human resources during project preparation and implementation. Utilisation of dedicated IT tool supporting project implementation.
Systems
  • absence of IT systems supporting project implementation
 Definition of alternative IT systems at the project planning stage or commencement of testing of other systems allowing project implementation.

Process / operational

Risks / processes Risk description Risk mitigation method
PROJECT
Budget overrun
  • inappropriate estimate of the project implementation costs
  • absence of including cost of additional work in project
  • unplanned costs arising during the implementation of the project
 Current monitoring of the contractor’s activities and potential delays in project realization. Systematic cost verification vs. planned budget.
Schedule overrun
  • inappropriate assumptions concerning the project completion time
  • underestimating the deadlines for completing the work carried out under the project
 Constant supervision over the performance of the work in progress, systematic evaluation of the progress of implementation of successive stages of the project and enforcement of performance of the work.
Project scope modification
  • incomplete performance of the project
  • exceeding the project framework/scope
  • lack of including all project work
  • extending the scope of the project with additional works
 Systematic analysis of the environment in which the project is being implemented. Depending on the circumstances arising, potential decision to change the scope of its implementation. Verification of planned and implemented works included in the scope of the project.
Division of competences
  • inappropriate division of competences between the organisational/substantive units involved in the project
  • unavailability of key decision makers
 Preparation and implementation of methodology concerning competency division of project team members in order to avoid conflict of interests. Appropriate allocation of human resources during project preparation and implementation. Utilisation of dedicated IT tool supporting project implementation.
Systems
  • absence of IT systems supporting project implementation
 Definition of alternative IT systems at the project planning stage or commencement of testing of other systems allowing project implementation.

1) For detailed description of the financial risks as well as the methods applied to measure, manage and hedge the risks, see section 13 of the Consolidated Financial Statements for 2019.
2) Process/operational risks – the table presents risks on an aggregated basis. The component risks they comprise are located in different organisational areas of the Company, so presenting their values and trends would involve excessive risk of error as a result of differences in the scope of the particular risks and the groups of companies exposed to them.
3) For a detailed description of the financial risks and their measurement, management and hedging methods, see Section 13 of the Consolidated Financial Statements for 2019.
4) The principal legislative acts regulating the oil sector include:

  • Biofuels – in Poland, the process of achieving the National Indicative Target in 2019 is governed by the Act Amending the Act on Biofuel Components and Liquid Biofuels and Certain Other Acts of November 24th 2017, which entered into force on January 1st 2018 – the purpose of the amendment was to facilitate the achievement of the National Indicative Target (NIT) by fuel companies and to modify the structure of its achievement. In 2019, the NIT baseline value was 8.0%, and starting from 2020 – 8.5%. Also applicable is the Act Amending the Act on the Fuel Quality Monitoring and Control System and Certain Other Acts of May 27th 2011 (as amended), where under entities which can document the use of at least 70% of biofuel components produced in compliance with the requirements set out in the Act are eligible to reduce their NIT. In 2019, the reduction coefficient was 0.82, while the NIT was 5.576% (based on the energy value, after taking into account the reduction coefficient and a 15% ‘buy-out’ price). The National Reduction Target (NRT) was also introduced − an obligation to reduce GHG emissions relative to 2010 by 6% by the end of 2020. On July 19th 2019, the most recent amendment to the Biofuels Act was enacted. In 2020, the NIT was set at 5.576 (8.5% baseline level x 0.82 reduction coefficient x 0.8 ‘buy-out’ price). Moreover, there are no provisions in the new Act that would limit the possibility of achieving the NIT through wholesale trade in B100 biofuels. The NIT baseline levels for 2021-2024 have been set at:7%, 8.8%, 8.9%, 9.1%, respectively. The reduction mechanism (reduction coefficient of 0.82) and the buy-out price mechanism (applicable when the NIT is met in 80% or more) were extended for the years 2020-2022, and the quarterly mandatory blending cycle was changed to an annual one. In addition, the Act contains a number of provisions not directly related to meeting the NIT, i.e. the obligation to mark fuel pumps and nozzles so as to clearly identify the type of liquid fuel distributed, as well as changes to biofuel reporting and to regulations applicable to the Low Emission Transport Fund.
    Delivery of the National Indicative Target in other markets:
    – The Czech Republic: NIT is achieved by blending biocomponents into gasolines (blending level of 4.1%) and diesel oil (blending level of 6%). Mandatory blending is accounted for on a quarterly basis, and GHG emissions are to be reduced by 6% by the end of 2020. Work is currently under way to introduce E10 fuel, which may be brought to the market in 2020. E98 gasoline will contain a higher amount of ETBE than E95, and both types will become E10 fuel.
    – Lithuania: mandatory blending of biocomponents into E95 gasoline (blending level of 5% until 2019) and into diesel oil, with the exception of arctic diesel (blending level of 7%). Starting from January 2020, E95 gasoline is subject to mandatory blending at a level of 10% in Lithuania and Latvia. In Lithuania, A1 and A2 arctic diesel oils are exempt from blending obligations.
  • Emergency stocks – producers and traders must pay a ‘stocks charge’ for gradual reduction in the amount of physical stocks they are required to hold. Poland: fulfilment of the physical stocks target – from December 31st 2017: 53 days, the stocks charge maintained at its current level (PLN 43/t of oil equivalent and PLN 99/t of LPG). Czech Republic: emergency stocks are maintained by a state agency at a level of 90 days’ net imports of crude oil and are financed from the state budget. Lithuania: maintaining stocks equivalent to the higher of 90 days’ average daily net imports or 61 days’ average daily domestic consumption. The amount equal to at least 30 days’ average daily domestic consumption is accumulated and maintained by the state agency as earmarked stocks, with the balance held by businesses.
  • Reduced electricity costs – a notification procedure is under way relating to a capacity surcharge reduction for energy-intensive industrial users (capacity surcharge reduction). If approved by the European Commission, the solution will make it possible to allocate the capacity surcharge to various end user groups, thus reducing the capacity market costs at the ORLEN Group. The Act on the Promotion of Electricity from High-Efficiency Cogeneration Plants provides for possible reductions in CHP surcharges for energy-intensive industries. A reduced CHP surcharge will apply to energy-intensive industrial users whose energy intensity is calculated as the quantity of grid electricity consumed in a given settlement period, taking into account the electricity produced by this entity in its own cogeneration sources. The quality surcharge is the tariff rate of the Transmission System Operator (TSO) which is passed on to end users through its distribution tariff. Ensuring continued application of reductions with respect to the RES surcharge and excise duty for energy-intensive industrial users.
  • Power generation support schemes
    – Capacity market – securing the interests of industrial power plants in the capacity market.
    – The requirement to introduce to the grid and sell electricity, as well as the requirement to introduce at least 70% of generated heat to a public heating network. A new solution provides for the introduction of a unit CO2 emissions ratio of less than or equal to 450 kg/MWh of electricity output, which will exclude from the support scheme all generation units other than gas-fired ones. The certificate-based support scheme is to be replaced by a scheme involving guaranteed bonuses for existing generation units and an auction system for new electricity generators.
    – Farm would be supported through a dedicated legal act governing the entire investment process from the pre-investment phase up to decommissioning, as well as a support scheme guaranteeing the project’s economic viability throughout its lifecycle. A scheme regulating the share of local materials and services in the investment process would be an important part of that dedicated legal act. The current RES support scheme under the Act on Renewable Energy Sources of February 20th 2015 does not provide adequate support for Small Hydropower Plant (SHP) projects, mainly as a consequence of structural constraints related to the organisation of competitive auctions and the overall situation of the Polish RES sector (including SHP projects).
  • CO2 emissions – following a revision of Directive 2003/87/EC of the European Parliament and of the Council of October 13th 2003 establishing a scheme for greenhouse gas emission allowance trading, work is under way on EU ETS implementing measures for the next trading period (phase 4). In April 2018, Directive (EU) 2018/410 of the European Parliament and of the Council, introducing changes to the CO2 emission allowance trading system (EU ETS 2021-2030), came into effect. The purpose of the amended ETS Directive is to reduce greenhouse gas emissions by at least 40% by 2030 compared with the 1990 levels and to meet the obligations under the Paris Agreement. In addition, pursuant to Commission Delegated Decision (EU) 2019/708 of February 15th 2019 concerning the determination of sectors and subsectors deemed at risk of carbon leakage for the period 2021-2030, ORLEN Group companies were included in the carbon leakage list, and thus became eligible to receive free emission allowances up to the benchmark values throughout the period 2021-2030. Following completion of the EU ETS reform, the price of emission allowances went sharply up, to reach the average level of EUR 25/UEA in 2019, which is reflected in the growing electricity prices.
  • Regulations on the liquid fuels market and combating informal fuel trade:
    – The Act Amending the Value Added Tax Act and Certain Other Acts of July 7th 2016 (the fuel package) contains a list of conditions to be fulfilled by entities applying for energy licences and sets down rules governing intra-community acquisition of goods (fuels) – the so called ‘VAT quick fixes’. The purpose is to streamline the liquid fuel market in Poland and guarantee legal production and imports of fuels.
    –     The Act Amending the Energy Law and Certain Other Acts of July 22nd 2016 (the energy package) introduces a number of changes in the Polish liquid fuel market, including new licensing regulations, a register of liquid fuels infrastructure, and extended reporting obligations regarding imports and production of fuels, supervision powers, etc.
    –     The Act Amending the Value Added Tax Act and Certain Other Acts of July 4th 2019 (amendments to the fuel package) modifies the definition of liquid fuel, introduces procedures for amending energy licences, and extends the catalogue of goods (fuels) eligible for ‘VAT quick fixes’ in intra-community acquisition transitions (when imported to Poland).
  • The purpose of the Act is to further curtail the informal fuel trade in Poland, and the legislation supplements solutions introduced as part of the fuel package and the energy package. It imposes an obligation to register road and rail transport of goods considered sensitive and to establish a relevant supervision system. Also, new provisions governing the fuel package and the monitoring of LPG transport came into force as from September 1st 2019 and December 1st 2019, respectively, providing for relevant transition periods. Apart from obligations to monitor the carriage of fuel oils and LPG, there are also amendments applicable to the transactions themselves and to provisions of the Excise Duty Act relating to fuel oil trade.
  • Emission charge − an emission charge is to be paid on motor fuels introduced to the Polish market. The obligation to pay the emission charge arises on the date of excise duty liability. An emission charge is calculated based on the quantity of motor fuels on which excise duty is payable. The rate for both motor gasolines and diesel oils is PLN 80 per 1,000 litres. The amount of an emission charge is to be reported and paid by the 25th day of the month following the month in which the payment obligation arose or, in the case of importers, by the payment date of customs charges. The emission charge regulations came into force on January 1st 2019 and will apply in the coming years.
  • Retail sales tax – the tax is levied exclusively on retail sales to consumers, with the consumer understood as a natural person not engaged in any business activity and a natural person conducting business activity and purchasing goods without connection with that business activity, as well as farmers subject to lump-sum tax within the meaning of the VAT Act. A retail seller is to be understood as a natural person (entered in the Central Registration and Information on Business – CEiDG), a legal person (mainly companies operating under commercial law), and an unincorporated organisational unit, including civil-law companies which engage in retail sales in the course of their business. In the definition of retail sale, goods are understood as movables or parts of movables, and provision of services is excluded from the definition. The tax obligation arises when revenue earned in a given month exceeds PLN 17m (VAT exclusive), and tax is levied on the portion of revenue in excess of that amount earned from that moment. Monthly tax rates are as follows: 0.8% of the tax base, if revenue does not exceed PLN 170m (VAT exclusive); 1.4% of the excess over the tax base, if revenue exceeds PLN 170m (VAT exclusive). In November 2019, the Polish Council of Ministers extended the suspension of the Act of December 31st 2019 until July 1st 2020, when the General Court of the European Union is expected to issue a judgment concerning the appeal lodged by the European Commission.
  • Natural gas market − the Act Amending the Energy Law and Certain Other Acts of November 30th 2016, which introduced a roadmap for the deregulation of gas prices in Poland as of October 2017 and imposed on importers the obligation to hold emergency gas stocks. The Act abolished the obligatory approval of gas tariffs for businesses by the President of URE (Polish Energy Regulation Authority) as of October 1st 2017 and imposed the obligation to reserve additional capacity on gas interconnectors (which cannot be used for commercial purposes) for the purpose of maintaining stocks abroad, which increases the cost of fulfilling the obligation.
  • Ban on Sunday Trading – the Act on Restricted Trading on Sundays and Public Holidays and Certain Other Days of January 10th 2018 has been in effect from March 1st 2018, regulating retail trading. In 2019, retail trading was allowed on the last Sunday of each month and on three Sundays before public holidays (15 trading Sundays and 37 non-trading Sundays). Starting from January 1st 2020, retail trading will only be allowed on three Sundays before public holidays and on four additional Sundays throughout the year (7 trading Sundays and 45 non-trading Sundays). Pursuant to the Act, service stations are exempted from the trading ban.
  • Taxation of upstream activities in Poland – tax on production of certain minerals, payable from December 2019, calculated individually for each well, at a rate of 1.5%–6% of revenue, depending on the type of deposits and hydrocarbons. Production royalty, depending on the volume and quality – for natural gas: PLN 5.34–PLN 24.73/1,000 Nm3; for crude oil: PLN 38.0–PLN 51.5/tonne. Extraction charge – fixed component (determined on a case-by-case basis) and variable component of 50% of the mineral production royalty for the previous year. Special hydrocarbon tax – payable from 2020, at 0%–25% of net cash flows, depending on the ratio of accumulated revenue to accumulated expenses, real property tax of up to 2% of the initial value of fixed assets, CIT at the rate of 19%.
  • Taxation of upstream activities in Canada: royalties – payable on wells spudded on or after January 1st 2017. Royalty rate from 5% to 40%, depending on the type of hydrocarbons, market prices, and well output. Exemption on account of incurred costs of drilling and completion – relief in the form of reduced tax liabilities with respect to all new qualifying wells. Royalty of up to 5% on a well’s early production until the well’s total revenue from all hydrocarbon products equals the drilling and completion cost allowance, CIT at the rate of 25%.

 

 

 

Non-financial risks

Risks relating to social, employee, environmental, and occupational health and safety matters, respect for human rights, corruption and bribery may occur in the three main categories of risks (strategic, project, process/operational) in the ORLEN Group.

The risks, mitigation methods and risk development trends are described  below.

 

RISKS / PROCESSES RISK DESCRIPTION RISK MITIGATION METHODS RISK DEVELOPMENT TREND
SOCIAL RISKS
A. Corporate social responsibility
  • Lack of public awareness of the ORLEN Group’s CSR activities
 Implementation of a CSR strategy defining the ways of communicating CSR initiatives Implementation and supervision of the Responsible Care Framework Management System and appointment of the Responsible Care Framework Management System Officer.
B. Reputation, brand and marketing management
  • Use of the brand in connection with adverse, controversial activities
  • Activities with adverse effect on the image of PKN ORLEN S.A.
 Supervision over the process of defining the methodology for conducting promotional campaigns; key activities subject to approval by relevant business areas.
C. Outsourcing and subcontractor risk
  • Limited control over the ORLEN Group’s processes which are subcontracted or outsourced
 Ensuring correctness, completeness and quality of documentation, including completion reports and checklists, in IT systems Regular assessments of service providers.
Background of the risk name – risk materiality for the organisation; critical, high, medium, low, very low
Background of the arrows – risk level after taking into account the control mechanisms; critical, high, medium, low, very low

Risk development trend year on year:

Falling Rising Stable

 

 

Effects of application of control mechanisms in risk management – positioning of risks on the risk map

A, B, C – social risks – risk materiality
A’, B’, C’ – social risks – risk level after taking into account the control mechanisms

RISKS / PROCESSES RISK DESCRIPTION RISK MITIGATION METHODS RISK DEVELOPMENT TREND
EMPLOYEE RISKS
A. Availability of employees and subcontractors
  • Loss of key personnel
  • Persistent shortage of experienced staff with relevant technical expertise
 Monitoring and reviewing of job-specific training needs, oversight of the recruitment process to ensure employment of candidates with relevant qualifications.
Supporting vocational education to develop practical skills.
B. Allocation and development of human resources
  • Constraints in recruitment/employee turnover; lack of transparency of the recruitment/employment termination process
 Identification of the key skills for a given position at the recruitment stage, supervision of the process of contract termination, control of the position change processes within the Company.
C. Social security and other benefits
  • Miscalculation of social security payments and other employee benefits
 Supervision of the process of calculation and verification of remuneration, social security and other employee benefits.
D. Workplace accidents and other hazards
  • Failure to identify material risks for particular jobs
  • Injury/death at a production plant
 Introduction of a health and safety hazard reporting system, including division of responsibilities, supervision of the hazard identification process in the occupational risk assessment, introduction of procedures to follow in the event of an accident at work.
E. Employees and subcontractors’ activities
  • Activities of employees and subcontractors resulting in violation of OHS regulations
 Reviewing and issuing opinions on contracts with subcontractors in terms of security certificates and security clauses, implementation of the Comprehensive Prevention System.
Background of the risk name – risk materiality for the organisation; critical, high, medium, low, very low
Background of the arrows – risk level after taking into account the control mechanisms; critical, high, medium, low, very low

Risk development trend year on year:

Falling Rising Stable

 

 

Effects of application of control mechanisms in risk management – positioning of risks on the risk map

A, B, C, D, E – employee risks – risk materiality
A’, B’, C’, D’, E’ – employee risks – risk level after taking into account the control mechanisms

RISKS / PROCESSES RISK DESCRIPTION RISK MITIGATION METHODS RISK DEVELOPMENT TREND
HUMAN RIGHTS RISKS
A. Breach of ethical standards
  • Inadequate ethical standards for a given business environment
  • No support for employees in resolving conflicts of interest
  • Ineffective system of internal reporting of unethical or illegal practices
 Keeping track and reviewing compliance with the value system set out in the Core Values ​​and Standards of Conduct of PKN ORLEN, appointment of the Ethics Officer, introduction of the Anonymous Misconduct Reporting System.
B. Labour law
  • Violations of labour law
  • Penalties imposed as a result of court proceedings initiated by current or former employees
 Obligatory knowledge of applicable laws and internal regulations governing employment relationships, i.e. the Work Rules, Core Values and Standards of Conduct of PKN ORLEN, etc. Agreement setting out the rules of cooperation between social partners in restructuring processes.
Background of the risk name – risk materiality for the organisation; critical, high, medium, low, very low
Background of the arrows – risk level after taking into account the control mechanisms; critical, high, medium, low, very low

Risk development trend year on year:

Falling Rising Stable

 

 

Effects of application of control mechanisms in risk management – positioning of risks on the risk map

A, B – human rights risk – risk materiality
A’, B’ – human rights risk – risk level after taking into account the control mechanisms

RISKS / PROCESSES RISK DESCRIPTION RISK MITIGATION METHODS RISK DEVELOPMENT TREND
ENVIRONMENTAL RISKS
A. Climate changes
  • Ensuring low-carbon economy compliance
  • Development constraints resulting from the principles of sustainability and circular economy
  • Disrupted supply of water to production units
 Marketing of bio-components or liquid biofuels Reducing the energy intensity of processes. Use of energy from renewable and low-carbon sources. Monitoring of water availability Water recirculation and wastewater reuse.
B. New trends
  • Growing market/public expectations regarding environmental investments
  • Little time to adapt to new environmental requirements
 Regular reviews of the compliance of internal regulations with legal requirements and their ongoing monitoring against the changing environment (regulations, decisions of public administration authorities, etc.).
C. Environmental protection regulations
  • New stricter requirements, standards, financial and technical safeguards
  • Failure to identify material environmental aspects in the operations
  • Unavailability of measurement results and data to prepare the required reports and/or failure to submit the reports to governmental authorities
 Active participation in issuing opinions on new European and national legislation through professional organisations, working committees, etc. Monitoring the validity of decisions issued by governmental authorities, monitoring the process of computing fees for the economic use of the environment, delegation of precisely defined duties and responsibilities with regard to environmental aspects.
D. Soil and water contamination
  • Environmental pollution as a result of accident or failure
  • High site restoration costs
 Monitoring of the technical condition of production units and their regular maintenance, ensuring compliance of reporting activities with applicable procedures, recognition of site restoration provisions.
E. Managing CO2 and other gas emission allowances
  • Failure to meet the requirements and guidelines for monitoring CO2 and other greenhouse gas emissions
  • Failure to obtain a permit for CO2 and other greenhouse gas emissions
  • Limits and rising price of CO2 emission allowances
 Updating internal regulations in line with legal requirements, keeping track of the validity of decisions issued by governmental authorities, environmental monitoring and reporting in accordance with applicable procedures.
Continuous monitoring and balancing of CO2 emissions.
F. Environmental impact
  • Non-compliance of the production process with applicable environmental protection standards
  • Lack of environmental capacity
 Inspecting the technical condition of facilities and equipment Monitoring of production processes. Environmental projects Involvement in urban air quality control programmes Noise protection.
G. Wastewater and waste management
  • Failure to comply with the conditions specified in relevant decisions as to the type and quantity of generated waste
  • Circular economy
  • Discharge of wastewater in violation of applicable permits
 Delegating responsibilities in waste management processes in accordance with the applicable procedure, monitoring the amount and types of waste in order to apply for and secure required amendments to the relevant administrative decisions.
Increasing the share of recovered and recycled waste in waste management processes (circular economy).
Monitoring and adjustment of wastewater discharge parameters.
Background of the risk name – risk materiality for the organisation; critical, high, medium, low, very low
Background of the arrows – risk level after taking into account the control mechanisms; critical, high, medium, low, very low

Risk development trend year on year:

Falling Rising Stable

 

 

Effects of application of control mechanisms in risk management – positioning of risks on the risk map

A, B, C, D, E, F, G – environmental risks – risk materiality
A’, B’, C, D’, E’, F’, G’ – environmental risks – risk level after taking into account the control mechanisms

RISKS / PROCESSES RISK DESCRIPTION RISK MITIGATION METHODS RISK DEVELOPMENT TREND
OHS RISKS
A. Workplace accidents and other hazards
  • Failure to identify material risks for particular jobs
  • Injury/death at a production plant
 Introduction of a health and safety hazard reporting system, including division of responsibilities, supervision of the hazard identification process in the occupational risk assessment, introduction of procedures to follow in the event of an accident at work
Introduction of a system for reporting near miss incidents and a procedure for handling such reports.
B. Fire safety
  • Fire
  • Injury/death as a result of fire
 Introduction of OHS and fire safety manuals, performing fire safety inspections, setting up a Process Safety Committee.
C. Chemicals management
  • Accidents/failures during transport or handling of chemicals
 Implementation of the provisions of the Comprehensive Prevention System, including delegation of responsibilities. Introduction of the Process Safety Management System at PKN ORLEN.
D. Employees and subcontractors’ activities
  • Activities of employees and subcontractors resulting in violation of OHS regulations
 Reviewing and issuing opinions on contracts with subcontractors in terms of security certificates and security clauses, implementation of the Comprehensive Prevention System Operation of an extensive training system, including the launch of the Training Centre at PKN ORLENDelivery of information, education and incentive schemes.
Background of the risk name – risk materiality for the organisation; critical, high, medium, low, very low
Background of the arrows – risk level after taking into account the control mechanisms; critical, high, medium, low, very low

Risk development trend year on year:

Falling Rising Stable

 

 

Effects of application of control mechanisms in risk management – positioning of risks on the risk map

A, B, C, D – OHS risks – risk materiality
A’, B’, C’, D’ – OHS risks – risk level after taking into account the control mechanisms

RISKS / PROCESSES RISK DESCRIPTION RISK MITIGATION METHODS RISK DEVELOPMENT TREND
ANTI-CORRUPTION AND ANTI-BRIBERY MEASURES
A. Fraud and other misconduct
  • Accepting financial gains from potential suppliers
  • Conflicts of interest with respect to transactions
  • Disclosure of confidential information
  • Falsifying management information or other documents
 Restricting access to supplier offers and the information they contain, monitoring impartiality towards potential suppliers, oversight of the supplier selection acceptance path.
Access to Business Secrets and any confidential data regulated by internal policies, restricted to authorised personnel, and monitored on an ongoing basis.
Procedures have been introduced for the verification of records and management information by the various Company departments.
B. Employees’ conduct resulting in violation of law
  • Involvement in illegal transactions or concealing information about illegal transactions by employees
  • Execution of contracts in circumstances where the law does not permit continuation of the process
 Review of the correctness of contracted obligations against powers of attorney/authorisations, supervision by authorised employees of supplier contracts and protection of the ORLEN Group’s interests.
Providing opinions on and approval of contracts by business functions in a dedicated system.
C. Misconduct on the part of customers or employees
  • Theft of fuel by employees or customers
  • Release of products to unauthorised persons, for unauthorised vehicles
 Regular inspections of service stations and terminals, verification and monitoring of reports on service stations’ compliance with the requirements.
Automatic process of blocking and unblocking sales orders for customers defaulting on payments and exceeding the trade credit limit, based on the applicable PKN ORLEN Instruction.
Background of the risk name – risk materiality for the organisation; critical, high, medium, low, very low
Background of the arrows – risk level after taking into account the control mechanisms; critical, high, medium, low, very low

Risk development trend year on year:

Falling Rising Stable

 

 

Effects of application of control mechanisms in risk management – positioning of risks on the risk map

A, B, C – corruption and bribery risks – risk materiality
A’, B’, C’ – corruption and bribery risk – risk level after taking into account the control mechanisms

RISKS / PROCESSES RISK DESCRIPTION RISK MITIGATION METHODS RISK DEVELOPMENT TREND
STRATEGIC
A. Assumptions
  • Inconsistent, unrealistic strategic objectives and assumptions
  • Change of strategic objectives/assumptions in the course of a process
 Regular checks of the validity of and monitoring of key strategic objectives against the changing environment (regulations, market, key suppliers, etc.).
B. Division of responsibilities
  • Inappropriate division of responsibilities among organisational units
  • No decision-making centre
 High degree of employee specialisation, appropriate delegation of duties and responsibilities by precisely defining their scopes.
C. New regulations
  • Adverse legislative changes
  • Public administration unable to effectively enforce law
 Participation in public consultations on draft legislation to limit the risk of unfavourable regulations coming into force.
D. Workplace accidents and other hazards
  • Insufficient knowledge of workplace safety standards among contractors
  • Threats to workplace safety and fire safety related to the presence of third-party contractors at the ORLEN Group’s facilities
 Oversight and management of contractors by implementing work safety monitoring tools. Implementation of uniform requirements for contractors and subcontractors in line with ORLEN Group Safety Standard No. 9.
Background of the risk name – risk materiality for the organisation; critical, high, medium, low, very low
Background of the arrows – risk level after taking into account the control mechanisms; critical, high, medium, low, very low

Risk development trend year on year:

Falling Rising Stable

 

 

Effects of application of control mechanisms in risk management – positioning of risks on the risk map

A, B, C, D – strategic risks – risk materiality
A’, B’, C’, D’ – strategic risks – risk level after taking into account the control mechanisms

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