The development of IGUÁ is exposed to a series of situational or circumstantial risks, associated with business activities, either specific or related to the sanitation sector. There are many variables to consider in planning risks, hence the importance of an efficient risk management system able to predict, prevent or mitigate eventual impacts to the day-to-day activities of the Company, its provision of services to the population and growth plans.
At IGUÁ, the Compliance area‘s mission is to strengthen and activate the internal control systems of its subsidiaries with the aim of meeting the demands of good corporate governance, enforcing laws, policies, guidelines and regulations established by various instances. Thus, the Compliance structure, in its relationship with the senior management and the subsidiaries, is responsible for integrating corporate practices related to the following themes: risk assessment; appetite for risk and risk tolerance; rules and responsibilities; policies and procedures and timely monitoring.
The work is developed on a tripod of initiatives: risk mapping, definition of internal controls and continuous monitoring. The priority is the definition of internal controls related to risks mapped based on IGUÁ’s risk appetite/tolerance. The appliIGUÁility and adherence of said controls are continually monitored. The mapping of risks and the structure of controls demand permanent upgrade to avoid losing effectiveness as management tools.
Risks Related to IGUÁ Saneamento
To the Issuer
- It currently has projects under development that points towards growth in its participation in the sector. It may not achieve these objectives and may also face a potential shortfall of funding for these objectives to be reached.
- The increase in competition in the industry may have a negative impact on its business strategy.
- The return on investment in infrastructure realized by the Company for the provision of public water and sewage services may not occur or may occur in a manner different than forecast.
- The acquisition of new concessions, new public-private partnerships and new acquisitions involve risks related to the integration of the businesses that are awarded or acquired, the discovery of contingencies that were not previously identified, to the state of assets and the compliance of the operations relative to the concessions, and they may not meet the financial and strategic goals forecast at the time that the concession was awarded, the public-private partnership was formed or the business was acquired.
- The investment, operating and maintenance costs may be higher than those that were estimated.
- Under the terms of its financial contracts, the Company is subject to specific obligations, as well as restrictions on its ability to take on additional debt.
- There may be interruptions or failures in its information technology systems, which may not be able to handle the growth or may have problems resulting from the outsourcing of the maintenance services for these systems.
- The Company is exposed to risks associated with the supply of public water and sewage collection services.
- It may incur in significant costs associated with the collection and treatment of sewage and the treatment and distribution of water.
- It may not be able to fully implement its business strategy.
- There may be changes in senior management or there may be difficulties in attracting and maintaining qualified personnel.
- It uses third party service providers for the operation and maintenance of its facilities.
- The insurance policies that it maintains may be insufficient to cover potential losses.
- It may have to respond to the State Court of Auditors with respect to the bidding processes that it is involved in, as well as questions from third parties regarding its bidding processes and its concessions.
- The concession contracts and public-private partnerships may be unilaterally rescinded in certain circumstances.
- If it is unable to attain the minimum percentage of outstanding common shares or maintain the minimum level of liquidity required in the Regulations of the BOVESPA MAIS, the listing authorization on BOVESPA MAIS may be cancelled.
- The level of debt could adversely affect the Company‘s ability to conduct its business and pay its debts. To its Direct or Indirect Controller or Controlling Group
- The interest of the Controlling Shareholder may differ or conflict with the interests of shareholders.
- The change in shareholder control may adversely affect them. To its Shareholders
- The Company plans to issue new securities, including as a result of the stock option plan that it may come to adopt, which could result in a dilution of the shareholder‘s interest in the capital stock.
- The Company may not pay dividends or interest on equity to its shareholders.
To its Subsidiaries and Affiliates
- According to the Brazilian legislation that regulates concessions and public-private partnerships, the corporate structure is composed of several special purposes entities, which may cause liabilities with respect to taxes, labor, environmental protection, consumer protection and bankruptcies arising from its subsidiaries.
- It is a Company (holding company) whose results depend on the results of its subsidiaries and there is no assurance that they will be available.
To its Suppliers
- Electricity, which is predominantly hydroelectricity in Brazil, is essential for its operations and there may be a water and energy shortage.
To its Customers
- The Company could face difficulties in collecting significant sums from overdue and unpaid user accounts, including from public entities.
To the Sectors of the Economy in which the Issuer Operates
- The Company may suffer impacts to its activities or businesses due to environmental legislation and regulation, as well as international agreements and treaties related to climate change.
- It cannot ensure that there will be no changes to the legislation enacted in 2007 with respect to the public water and sewage services sector in Brazil.