Risk Management
The Telecom Italia Group is exposed to the following operating and financial risks in the ordinary course of its business operations. The main risks are: market risk, credit risk and liquidity risk.
These financial risks are managed by: the establishment, at a central level, of guidelines for directing operations; the activities of an internal committee which monitor the level of exposure to market risks consistently with prefixed general objectives; the identification of the most suitable financial instruments, including derivatives, to reach prefixed objectives; the monitoring of the results obtained; the exclusion of the use of financial instruments for speculative purposes.
Operating risks
The analysis considers the macroeconomic trend of the countries where TI is present and the telecommunications sector tout cours.
Italy
In 2011, growth of the Italian economy should be on levels similar to those recorded in 2010. Despite expectations of a further growth in exports, weak internal demand and policies reducing the public debt will adversely affect the intensity of recovery.
- Private consumption, in particular, will continue to be affected by a strong uncertainty over the employment situation and a possible rise in interest rates.
South America
As far as the South American market is concerned, especially in reference to Brazil and Argentina, the recovery recorded in 2010, after the contraction displayed following the world financial crisis, is expected to be confirmed in 2011.
- In Brazil, trade levels in 2010 exceeded the levels reached before the financial crisis, with raw materials accounting for a higher share of total exports; a possible fall in raw materials prices could jeopardize growth.
- In Argentina, the inflation level has risen since 2005, remaining relatively high from 2006 to 2010. The recent gains recorded in the economy could produce a rise in inflation, which could lead to a downturn in consumption, including those of telecommunications services. However, regarding the forthcoming presidential elections in 2011, there exists uncertainty over the future evolution of the political and economic context of the country.