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Responsible management

Responsible management

EWE AG was designed to be a management holding company. Its duty is to preserve and increase the value of the Group. Therefore, the Board of Management controls the Group and its segments.

The strategic orientation of the management levels is often examined in management meetings, with consideration for internal analyses and considerations of the landscape in which the EWE Group is operating.

Additionally, at irregular intervals we factor the interests of our stakeholders into a materiality analysis from which we derive the key non-financial issues for the EWE Group.

In order to control financial and non-financial concerns, measurable targets are agreed on the basis of statistics or progress criteria and frequently examined in management meetings.

In the energy sector, established business models are losing more and more profitability due to recent technological developments, changing customer behaviour and adjustments to the competitivelandscape. New business models give rise to both opportunities and risks. Therefore, in 2016, the EWE Group strategically reoriented itself with the change and increased its ability to adapt to the changing market situation through partnerships and collaborations.

Likewise, the restructuring project ‘Holding 2.0’ redefined the Group’s concept of management in 2016. Following the project, the management of the EWE Group is focused on both financial and non-financial aspects. A target agreement system with monetary, non-monetary, strategic and operational targets was implemented for executive employees.

The organisational responsibilities as part of management and controlling are defined and documented in Group guidelines, including in the Group finance and risk management, Group controlling and Group development guidelines. Additionally, so as to minimise negative effects on the company, environment and society, the following guidelines have been implemented: information security; health, safety and environment; crisis and emergency management and data protection.

Our code of conduct *NFS*

Integrity and transparent business processes are key prerequisites for responsible management. In 2012, EWE set out guidelines for these in a code of conduct centred on the principles of sustainability, fairness and safety which sets out rules for avoiding conflicts of interest, dealing with business partners, gifts and sensitive company information.

Risk management

EWE has established an integrated risk management system across the Group in order to quickly identify and actively manage potential risks in connection with its business activities. The system makes it possible to identify and analyse key risks. Additionally, the internal control system for controlling and limiting key risks is documented and its effectiveness is tested annually. The Board of Management of EWE AG receives monthly reports on the results of the system; the supervisory committees receive quarterly reports.

Corporate responsibility

Our business is carried out in a regulatory environment. This environment affects the course of business. Additionally, we operate in markets with intense competition. We meet these corporate challenges with strategic measures. For example, we invest in our grid infrastructure and are capable of meeting the requirements of our strong customer base. Our central risk management system enables us to systematically track the key risks of our fields of business and Group activities, evaluate them and define control measures to avoid or minimise them.

Crisis management

We have established a crisis and business continuity management system to protect and maintain our most vital business processes and the infrastructure required for them to function. We use this system to continuously analyse potential threat scenarios such as natural disasters, IT disruptions or attacks on our infrastructure, determine their effects and then derive specific measures and plans that can be put into place in such cases in order to keep our operations running.

Key risks as part of non-financial reporting *NFS*

In line with the legislation that has been in effect since 1 January 2017, we consider the risks that have significant negative effects on the aspects identified in our non-financial reports in addition to the key risks to our business activities.

Therefore, we have identified and assessed key risks relating to the individual concerns of the heads of our departments. The Group-wide risk management department has examined the risk assessments carried out for each individual concern with regard to risks that could very likely have serious negative effects on the concern. Finally, the risk inventory documented in the integrated risk management was examined.

These examinations have not identified any risks that could be considered highly likely to have a serious negative effect on the concerns as at the reporting date.

Corruption prevention *NFS*

We are aware that we are very much in the public eye and that integrity is a key prerequisite for the success of our company. Strict adherence to the laws and regulations is a key prerequisite to avoiding potentially significant legal and economic risks for EWE and its stakeholders.

Concept

EWE does not tolerate corruption or bribery. This means that at EWE, it is forbidden to offer, promise or accept incentives, preferences, favours or other advantages intended to influence a business decision or give that impression. We have codified this in an internal code of conduct as well as in our code of conduct for suppliers that our business partners must follow.

EWE has established a compliance management system (CMS) in which central duties are fulfilled by the compliance officer. The compliance officer is assisted by a compliance committee chaired by a number of different roles. Additionally, on the level of individual companies, compliance officers are appointed to manage the implementation of the compliance regulations in subsidiaries. They report to the management of each company and notify the compliance officer of related developments. Quarterly reports are submitted to the Board of Management on the basis of these reports. Other compliance-related duties are carried out by the Group auditing department, risk management department and certain special officers.

Selected measures in 2017

In its meeting on 8 September 2017, the Supervisory Board of EWE AG discussed and agreed a final evaluation of the results of the final reports of the audit firm KPMG which investigated possible misconduct at EWE in spring and summer 2017.

In 2016, we started subjecting the compliance organisation to an external audit and identifying room for improvement. We have been implementing improvement measures since early 2017. These include the introduction of independent compliance and data protection roles at EWE AG. Human resources have been expanded here and in the decentralised EWE companies. Besides additional training courses, we also provided a mandatory e-learning course on corruption prevention in the majority of the companies.

In 2017, more than 3,700 employees 1 in the EWE Group were trained on corruption prevention with a mandatory e-learning course (EWE AG: 418 employees). EWE will strive to reach a larger number of employees over the next few years, including by means of a standard Group-wide learning management system. 3,700 employees in the EWE Group were trained on corruption prevention 418 employees at the EWE AG were trained on corruption prevention

1 EWE AG, EWE NETZ GmbH, EWE TEL GmbH, EWE VERTRIEB GmbH, EWE DIREKT GMBH, EWE ERNEUERBARE ENERGIEN GmbH, EWE GASSPEICHER GmbH, EWE TRADING GmbH, EWE OSS GmbH