8.3 Risk appetite, risk profile and risk tolerance

The process of determining the risk appetite and limits for separate categories of risk in line with the group process has been implemented in PZU Group's insurance companies. The Management Board of each company determines the risk appetite, the risk profile and tolerance limits which reflect its strategic plans and objectives of the entire PZU Group.

The risk appetite has been defined as the risk that the company is prepared to accept in pursuit of its business goals. The measure of risk appetite is the level of potential financial loss, decrease in the value of assets or an increase in the value of liabilities in the period of one year. The level of risk appetite is defined as the minimum capital requirement coverage ratio. The risk appetite determines the maximal level of acceptable risk when setting limits and restrictions for individual partial risks and the level which, when exceeded, results in taking specific management measures necessary to limit further risk growth.

The risk profile involves quantitative limits which define the risk appetite more precisely.

Tolerance limits are additional limits introduced for individual risk types to mitigate the potential risk.

Such an attitude ensures appropriateness and efficiency of the risk management system in PZU Group and prevents risk acceptance at a level which could pose a threat to the financial stability of both individual companies and the entire PZU Group. The company's Management Board is responsible for determining the appropriate risk level for that company. The risk unit reviews the level of risk appetite once a year. All activities are coordinated at the level of PZU Group.

The key assumptions of market and liquidity risk management strategy at Alior Bank are included in the assets and liabilities management policy which is drafted on annual basis and presented by the Management Board of Alior Bank to the Supervisory Board of Alior Bank for approval as a part of the year budget. In banking activity, the exposure to market and liquidity risk is formally mitigated by the system of periodically updated limits cover all measures of said risks.


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