We have an enterprise-wide risk management approach, which means we:

• have a risk and reward focus at all levels of the organisation
• evaluate significant risk exposure related to major commitments
• manage and coordinate risk at corporate level

We divide risk management into three categories:

• Strategic risks, which are long-term fundamental risks monitored by our Corporate Risk Committee. Our Corporate Risk Committee, which is headed by our Chief Financial Officer and which includes, among others, representatives from our principal business segments, is responsible for reviewing, defining and developing our strategic market risk policies. The committee meets monthly to decide our risk management strategies, including hedging and trading strategies and valuation methodologies.
• Tactical risks, which are short-term trading risks based on underlying exposures managed by our principle business segment line managers, and
• Operational risks such as those described under risk factors and which cover all major operational goals and underlying risk drivers are managed by our principle business segment line managers. In addition, insurable risks are managed by our captive insurance company operating in the Norwegian and international insurance markets.

To address our strategic and tactical risks, we have developed policies aimed at managing the volatility inherent in certain of these natural business exposures, and, in accordance with these policies, we enter into various financial and commodity-based transactions (derivatives). While the policies and mandates are set at the group level, the business areas responsible for marketing and trading commodiites are also responsible for managing the commodity-based price risks. The interest, liqudity, liability, and credit risks are managed centrally by the finance department.

The following section describes in some detail the market risks that we are exposed to and how we manage these risks.