7.3 Limits of Authorities
In addition to the levels of authority in the preceding item, the following apply:
· Make changes the Policy: Board of Directors
· Approve eligible instruments: Board of Directors
· Define the risk management strategy: Financial Risk Management Committee
· Approve alternative hedging transactions: Financial Risk Management Committee
· Define hedging instruments: Analysts/traders, from the alternatives approved by the Financial Risk Management Committee;
· Perform the transactions: Analyst/operators, provided that observing the limits and guidelines established by the Financial Risk Management Committee.
8. GENERAL CONDITIONS
Some relevant remarks are set out below:
· Hedging transactions may be performed solely if they do not extrapolate, in the whole, i.e., portfolio transactions (transactions already carried out by the Company’s financial and raw material areas) + new transactions, the specified limits.
· The Financial Risk Management Committee shall pay special attention to the total hedging transactions in case the variables are close to any of the limits;
· As a result of settlements and maturities of derivatives and non-derivatives contracts in the current month under analysis (intramonth), the minimum limit of that month will not be considered due to the natural adjustments made for adequacy of the limits from one month to the next;
· The calculation of exposures must always consider the set of derivatives + underlying asset (Operating Flow or accounting position, both net position);
· The basic purpose of the Value at Risk - VaR is to control adjustments. Therefore, solely standard derivatives traded on the Commodities and Futures Exchange (with daily adjustment) and transactions with derivatives that can be settled in advance by a tactic decision of the Financial Risk Management Committee will be considered;
· It is important to note that if there are structural factors influencing exposures (e.g. new borrowings, prepayments, changes in raw material purchases and in sales, etc.), the limits may be reviewed to reflect the new reality.