Algar Telecom

Risk Management

The corporate risk management is an integral part of all strategic and operational processes, and aims at preserving and creating value to Algar Telecom, its shareholders and the other stakeholders. In line with both the best corporate governance practices and the Algar Group's directives, the Company holds a committee, which directly reports to the Board of Directors, alongside a well-structured risk management policy, shared with all related parties.

With the purpose to identify, assess, classify and prepare he action plans to mitigate the different risks inherent to the Group's business operations, the Risk Audit and Management Committee makes use of the Enterprise Risk Management (ERM) methodology, adopted by the Committee of Sponsoring Organizations (COSO), an international organization that sets out and disseminates the best risk management, internal controls and fraud detection practices.

The committee is responsible for monitoring the compliance with the rules set out by the Algar Group's Risk Management System, without losing sight of the principles established by the management model – among which, "Autonomy with Responsibility". Cases involving conflicts of interest must be identified, assessed and treated in accordance with the best corporate governance practices.

In 2012, the Company experienced a solid reinforcement of its risk management policy, by executing the action plans related to the strategic risk control, which had been mapped in previous years. At present, the Company seeks to mitigate the different types of strategic risks found in Algar Telecom, Algar Tecnologia and in Engeset, which take into account the sector's regulation, the market, the business management, availability of workforce, supply of raw material, third-party default, besides other likely adverse situations that may impact the Company's operations.

Total strategic risks - (cases in 2012)

Algar Telecom Algar Tecnologia Engeset
11 14 13

The Company has an Information Security Team, dedicated to fighting fraud. No corruption cases were found during the 2005-2012 period.