All strategies to manage financial market risk and risk hedge
operations of the Group are carried out pursuant to the Rule which
stipulates the Group’s basic policies for derivative transactions,
management policies, management items, procedures, criteria for the
selection of counterparties, and the reporting system, and so forth.
The Rule prescribes that (i) the Group’s financial market risk is to be
controlled by the Company in a centralized manner, and that (ii) no
individual subsidiary is permitted to initiate a hedging operation
without the prior approval of, and regular reporting back to the
Company.
The basic hedge policy is subject to the approval of the Monthly
Hedge Policy Meeting attended by the corporate officer in charge of
Treasury Department. Execution and management of all deals are to
be conducted pursuant to the Rule. Derivative transactions are
conducted by a special section of the Treasury Department and
monitoring of contracts for such transactions and confirming the
balance of all open positions are the responsibility of back office and
risk management section. Commodity futures contracts are to be
handled also by Treasury Department under guidelines which are to
be drawn up by the MRMC (Materials Risk Management Committee).
The MRMC is chaired by the corporate officer in charge of the
Purchasing Department and the corporate officer in charge of
Treasury Department and it will meet approximately once every six
months.
The status of derivative transactions is reported on a daily basis to
the chief officer in charge of Treasury Department and on an annual
basis to the Board of Directors. Credit risk is monitored quantitatively
with reference to Renault’s rating system based principally on the
counterparties’ long-term credit ratings and on their shareholders’
equity. The Finance Department sets a maximum upper limit on
positions with each of the counterparties for the Group and monitors
the balances of open positions every day.