Risk management

Decrease in demand on telco
services and products.

The rapid and huge increase in traffic generated near the eastern border by the number of refugees may decrease network capacity and hinder provision of telco services in this part of the country.

To assure seamless provision of telco services, Orange Polska adjusts its network parameters to increased traffic.

Orange Polska’s failure to successfully implement its
strategy could lead to a loss of market share and/or shrinking margins.

• Decrease in demand on telco services and products.
• Increased competition and pressure on services and prices.
• Increased competition in the convergent market.
• Failure to obtain the expected return on investment in fibre and loss of broadband market share.
• Additional pressure on telco operators taking part in tenders for the public sector.
• Disruption in global supply chain.
• Emergence of new types of fraud with new technologies

The main markets in which Orange Polska operates are under growing competitive pressure resulting from the entrance of new players and a growing number of operators pursuing fixedmobile convergence strategy. In particular, acquisition of UPC (the largest cable operator) by Play (leading mobile-only operator) creates a new potentially strong convergence operator.

These market changes and trends could limit Orange Polska’s ability to deliver convergence ambitions as the market will be more crowded and impact our value strategy as stronger competitors could put pressure on retail market pricing. Market changes could also decrease return on investment from Orange Polska’s FTTH investments as some demand could be utilised with new open access wholesale providers. Government spreading its ownership in the telco sector may cause direct impact on the Company’s revenues from the public sector.

Due to the pandemic situation, manufacturers of electronic equipment saw growing inefficiency. The lead-time for provisioning respective devices has suddenly been extended by as long as 180 days. Such a situation may result in lack of electronic equipment in several business areas for Orange Polska’s own purposes and for its customers.

Moreover, with the growing complexity of technologies and networks and accelerated implementation of new applications and services, particularly related to interconnection and customer relationship management, new types of fraud which are more difficult to detect or combat could also emerge. This may result in a loss of revenues.

Orange Polska has chosen to consider more openness on the wholesale market to allow other operators to sale on the Company’s FTTH network (e.g. T-Mobile) to boost network profitability. In order to further expand our fibre footprint we have signed a FibreCo partnership which will build fibre network to additional 1.7m households by 2025. FiberCo will operate as wholesale service provider only, providing access to its network on equal terms to Orange Polska and other interested operators. Additionally, the Company is actively engaging other FTTH infrastructure providers to obtain more fibre coverage to keep advantage of scale over other ISPs.

Additionally, we are constantly investing in the quality of our sales channels and customer care service

Unmatched data connectivity for households and businesses.

• Orange Polska’s IT&N infrastructure outage.
• Energy blackouts.
• Exposure of Orange Polska to cyber attacks.
• Exponentially growing network traffic.
• Occurrence of human errors, acts of terrorism or sabotage.
• Increase in number and severity of weather phenomena.
• Exposure to infection of field workers and engineers who fix network malfunctions.
• Decrease in quality or nonperformance of services due to dependence on external partners

Critical infrastructure is secured from possible limitation in energy supply.

Climate change analyses are taken into account with a longterm perspective to adjust plans for infrastructure roll-out with regards to rapidly intensifying weather phenomena through the next few decades. Orange Polska holds the ISO 22301:2019 Certificate for its Business Continuity Management System in the scope of provision of telecommunication, ICT and cybersecurity services.

Effortless and friendly
customer experience.

• Breach of security of information, including personal data.

For infringement of GDPR protection rules, administrative fines of up to 4% of annual global turnover may be imposed. Such incidents could have a considerable impact on the Group’s reputation and a heavy impact on its liability, potentially including criminal liability, and hence have an adverse impact on Orange Polska’s future financial performance.

Like in the case of personal data, Orange Polska faces a risk of unauthorised disclosure, publication or communication to unauthorised entities of proprietary information constituting corporate secrets, particularly the details of intended initiatives, marketing campaigns, new offers or sales packages. The premature disclosure thereof could result in Orange Polska’s failure to achieve its sales objectives and loss of its market share. The main causes of this risk include: (i) industrial (corporate) espionage, (ii) malicious acts (including cyber-attacks), particularly aimed at theft of proprietary information, or (iii) potential negligence on behalf of the Group or its business partners.

In addition, Orange Polska holds a certificate of compliance with the ISO/IEC 27018 Code of practice for protection of personally identifiable information (PII) in public clouds acting as PII processors. This covers personal data processing services in cloud computing via ICS (Integrated Computing Standard), ICM (Integrated Computing Managed) and smart CCaaS (smart Contact Centre as a Service) cloud computing.

Furthermore, the Company holds and maintains FIRST and Trusted Introducer certificates for CERT Orange Polska.

• Increase of interest rates.
• Depreciation of the local currency.
• Further increase of inflation, in particular the cost of energy

In 2021 the Polish Central Bank started increasing the reference rate from a historic-low 0.10% up to 2.25% at the end of the year. The market expects that the Monetary Policy Council will keep increasing rates in 2022 until we see material slowdown in CPI.

Foreign exchange rate fluctuations affect Orange Polska’s liabilities when denominated in foreign currencies, and settlements with foreign operators.

The increase in electricity prices is driven mainly by two factors. One is that the price for allowance of carbon emission was raised from PLN 100 per tonne of carbon dioxide in May 2019 to PLN 310 per tonne in November 2021. This resulted in the wholesale price for future deliveries of electricity soaring from PLN 150/MWh in April 2021 to PLN 495/MWh by the year’s end. Additional factors included an increase in gas prices in Q1 2022 (by 500% since August 2021), lower than expected wind-generation (13% lower yoy in H1 2021) and an increase in demand on energy in Poland (5% yoy). Further increases in the price of energy may result in further significant growth of operating costs, leading to additional pressure on operating profitability.

Potential depreciation of the Polish zloty should not have any major influence on Orange Polska’s liabilities denominated in foreign currencies or settlements with foreign operators, also thanks to a high hedging ratio.

Following the .Grow strategy, Orange Polska will increase the share of renewable energy in our energy supply mix to significantly reduce carbon emissions, which translates to decrease of total energy costs. Orange Polska is looking for short- and long-term contracts with renewable energy suppliers that do not include costs of emission allowances, which allows us to reduce the budget risk in the coming years.

Additionally there are sets of actions to improve energy effectiveness to decrease its usage for own purposes.

• Risks related to acquisition of new spectrum for high-tech telecommunications services (including 5G).
• Potential consequences of US – China Dispute.
• Legislative process of Electronic Communications Law (which will replace the current Telecommunications Law).
• Proceedings by UOKiK and the European Commission related to network sharing.
• Financial corrections or compensation for delays in POPC investments.
• Increased tax burden and fiscal pressure resulting from changes in legislation.
• Increase in remuneration for the use of third parties’ land for the purpose of development and maintenance of Orange Polska’s infrastructure.
• Reputational and financial losses resulting from involvement of Orange Polska’s employees in corruption schemes.

Adjustments of operations to the provisions of the new Electronic Communications Law will be required in 2022. The new law (currently going through the legislative process) will replace the Telecommunications Law and will constitute a new legal framework for telecommunications operators.

There are ongoing legislative works at the government level to the draft law on a national cybersecurity system. This draft law includes, inter alia, the assessment scheme of so-called high-risk suppliers. Among the assessment criteria there is control over a given supplier by a non-EU, non-NATO state.

For telecom operators, such as Orange Polska, the imposition of such regulations could affect the range of telecommunications equipment suppliers available on the market, which may bring delays to, or increase costs of, implementation of the 5G network. New regulations could also entail other costs related to an obligation for withdrawal of products/services/processes provided by a high-risk vendor.

There is a risk of failure to achieve the expected return on investment due to obligation to extend the scope of investment with regard to POPC.

Despite Orange Polska’s drive to strengthen its anti-corruption policy, corruption cases could occur due to the number of partners engaged and complex processes performed. This could have an adverse impact, particularly on Orange Polska’s reputation.

At the European level, in 2019 the European Union commenced work to develop a concerted approach to 5G network security, particularly carrying out a risk assessment and identifying the key risks affecting 5G networks. As a result, a general approach to 5G network security was presented in the report “Cybersecurity of 5G networks – EU Toolbox of risk mitigating measures” published January 2020. This document does not explicitly exclude or prohibit any supplier. However the risks of dependence on one supplier, as well as that associated with the supply chain, including the activities of other countries, were considered significant. It is also foreseen that Member States will carry out riskprofile analyses and, depending on their results, introduce appropriate restrictions and exclusions especially for key resources. This is also done at the national level, as reflected in the signing of the U.S.-Poland Joint Declaration on 5G in 2019 and commencement (2020) of a legislative process regarding new requirements for the security and integrity of telecommunications networks, including 5G. Orange Polska tracks this area of possible regulation and will act to comply with any new obligations if they are put in force.

Orange Polska has implemented an Anti-Corruption Policy and Guidelines. These regulations contain detailed rules and standards as well as references to specific conditions and circumstances relating to the identification and mitigation of corruption risks. In addition, we have carried out a number of training and information campaigns to raise awareness of anti-corruption laws and rules among employees. In 2019 a new anti-corruption training programme “Zero tolerance for corruption” was implemented within Orange Polska. Training was targeted according to the exposure particular groups of employees had to these risks.

Acting in an effective and
responsible manner

• Adverse effects of EMF
  on human health.
• Decline in use of mobile
  telecommunications services.
• Difficulties and additional expense in rolling out base stations and other wireless equipment

Based on the Government’s assessment of the scientific evidence, since January 1, 2020, the Polish EMF limits have been consistent with the Council Recommendation 1999/519/EC. Consequently, they are currently similar to the limits adopted in most European countries. If in the future new scientific evidence gave rise to greater concern, this would likely result in a decline in use of mobile telecommunications services, difficulties and additional expense in rolling out base stations and other wireless equipment, and an increase in litigation.

• Disruption in key processes due to unavailability of critical Orange Polska’s staff.
• Decreased revenue in roaming services.

Lockdown in tourism and business travel may decrease revenue in roaming services.

• Reputational damage from real or perceived failure to deliver on our climate action ambitions and goals (and in particular emission reduction goals).
• Insufficient regulatory support in development of renewable energy in Poland.
• Low interest on the part of customers in adopting carbon neutral and/or emission-reduction solutions.
• Lack of a national Polish net zero emission strategy.

While 5G is more energy-efficient than older technologies, continuous increases to data-traffic volume will increase the overall electricity consumption and could, therefore, mean higher CO₂ emissions (as electricity use is the principal emission driver in telco). Increasing the share of renewable energy used by OPL through long-term Power Purchase Agreements is crucial to reducing Orange Polska’s emissions despite this growth.

The appointment of a Climate Officer (in particular to set climate objectives, working closely with the Group’s business strategy, and to implement and pilot relevant action plans for 2025) and developing a green strategy and action plan (#OrangeGoesGreen).

Open dialogue with stakeholders on Orange Polska’s engagement and actions as well as the positive impact of the telco industry on reducing emissions in other sectors.

Purchase of green energy through long-term Power Purchase Agreements directly with producers to reach 60% of such energy in our consumption mix in 2025.

Continued action to optimise the energy used, including but not limited to technology evolution, and further deployment of more energy-efficient solutions (e.g. 5G vs 4G, fibre vs. copper).

• Infrastructural damage or malfunctioning.
• Energy provision, usage and costs.
• Disruption of supply chains due to climate change-related issues.
• Regulatory and socio-economic impacts linked with climate change.

Increased pressure on the national energy system, which may result in lower energy supply and higher pricing, and – in more serious cases – even localised blackouts.

Increased cooling requirements of the Company’s infrastructure itself due to higher ambient temperatures.

Problems in provision of Orange Polska’s services due to the lack of equipment or delayed deliveries of equipment.

Potential problems in functioning of ICT systems due to delays in equipment deliveries.

Regulatory requirements regarding the biggest enterprises linked with climate change (mitigation or adaptation) that could impact financial performance.

Demographic and socio-economic changes may be expected

• Risk of physical injuries or psychological disabilities.
• Risks related to human resources and alignment of organisational structure.

• Threat to human health, safety or security which could originate with its own activities, actions or omissions.
• Global supply chains with less control over working conditions.
• Increasing the mental burden of people due to pandemic.
•  Company restructuring.

Due to the conditions of the pandemic, the risk of psychological problems has increased.

Human health and safety issues are also addressed in contracts with suppliers through CSR clauses and the Supplier Code of Conduct.

• Threat to human health, safety or security which originate with its own activities, actions or
  omissions.
• Company restructuring

Due to the pandemic there are fewer possibilities on the labour market.

• Negative impact of new technologies on children and young people.

• Increasing the share of technology in social life.
• Remote learning in schools during the pandemic.
• Addiction of young people to the Internet, games and social media.

• Slavery, forced labour and child labour

• Global supply chains with less control over working conditions.

On the national level, Orange Polska’s purchasing contracts with suppliers include CSR and compliance clauses and incorporate the Code of Ethics and the Supplier Code of Conduct, which particularly address the issues of human health, safety and protection. Our local whistleblowing system, ‘Ask an ethicist’, is available to our suppliers and other stakeholders

• Risk of poor working conditions

• Global supply chains with less control over working conditions.

Due to the pandemic the risk concerning safe work conditions has increased.

This risk can potentially appear on the level of providers of services to Orange Polska in such areas as personal outsourcing, process outsourcing or technical partners. Human health and safety issues are addressed in contracts with suppliers through a CSR clause, as well as incorporation of the Supplier Code of Conduct and the Code of Ethics. Any irregularities in this area can be reported through our local whistleblowing system, ‘Ask an ethicist’, which is available to both our employees and suppliers.

• Breach of freedom of expression

• Increasing the share of technology in social life.
• Availability of content and user tracking mechanisms in the Internet.
• Social unrest and online disinformation

The Company has a set of policies / procedures for sharing data with authorised entities, which is approved by the management, published and made known to all employees and relevant external parties.

All liabilities related to the disclosure of data to authorised entities were defined, allocated and formalised.

Information and data in the Company are classified by legal requirements, their value, criticality and sensitivity to unauthorised disclosure or modification.

Users have access to information / data only in the extent that they have been authorised. According to the access control policy, access to information is limited.

Formal policies, procedures and safeguards have been established to protect the data and information being shared by all means of communication.

The process of providing data to authorised entities is regularly monitored, reviewed and audited by both internal and external auditors.

• Discrimination

• Global supply chains with less control over working conditions.
• New legal regulations regarding accessibility requirements for customers with disabilities.
• Digital exclusion of the elderly

The key diversity dimensions in the Group are as follows: gender, age, competence / expertise / experience / way of thinking, psychophysical skills, (dis)abilities, and parental status. Other diagnosed dimensions include: religion / beliefs, workplace location (HQ vs. region), type of employment and nationality / ethnic origin.

The Company will also implement programmes for customers with special needs – facilities for older customers and customers with disabilities.

• Risk of loss of trust and reputation due to improper treatment of hazardous waste

• Increasingly restrictive laws and requirements in the field of electronic waste.
• The Company’s obligations to apply a circular policy.

Orange Polska has adopted an Environmental Protection Policy, which identifies the negative impact of our processes on the environment and provides for categorisation and monitoring of waste, particularly hazardous. The Company monitors the processes which may affect the environment in compliance with environmental laws and regulations, and applies technological solutions to reduce its negative environmental impact.

Waste electronic and electrical equipment (WEEE), batteries and storage cells, cables and telegraph poles are disposed of under strict control in co-operation with waste disposal companies that take full responsibility for further waste management, document the subsequent stages of waste treatment and hold a waste management licence (following registration by the Chief Inspectorate for Environmental Protection).

Environmental issues are also addressed in contracts with suppliers through CSR clauses and the Supplier Code of Conduct.

• Risk of ineffective WEEE collection processes

• Increasingly restrictive laws and requirements in the field of electronic waste.
• The Company’s obligations to apply a circular policy

Customers can return used devices through our customer service centres or our dedicated online platform under a handset buy-back programme, which involves collecting used-but-working handsets in return for discount vouchers. In addition, the Company has implemented a programme of refurbishing and relaunching old electronic equipment.