Introducing PSE

We are the only electricity transmission system operator in Poland. We manage the transmission network that feeds the distribution network, through which electricity reaches homes, businesses and institutions all over the country.

As a company that cares about the reliability of electricity supply to all regions of the country, we have a real impact on the development of Polish economy and businesses. We also ensure safe and economic operation of the National Power System as a part of the common European system.

Introducing PSE

Risk management

Risk management is an integral part of our organization's operational and decision-making processes. It takes place within the framework of power system management, system development, ICT, maintenance and investment. When initiating and then implementing activities in these and other business areas, we take into account the risks whose materialization could contribute to a failure to achieve the intended strategic and operational objectives, including those affecting the organization's ability to ensure continuous operation regarding both the National Power System and the company itself.

Risk management activities undertaken at the strategic and operational levels also include the process of identifying, assessing and monitoring the risks, carried out in accordance with the PSE's Risk Management Policy, in all areas of the company's operations.

The company uses the Risk Assessment Methodology at PSE S.A. and its subsidiaries, which defines the approach used to identify and assess the most significant risks from the perspective of the NPS and the organization.

The methodology and accompanying tool solutions support the following:

identification of key risks associated with the functioning of the organization, in particular those relating to operational, maintenance and investment activities,
assessment of identified risks, their quantification and presentation in the form of ranking,
determining the relationship between the identified risks,
conducting ongoing monitoring of risks, including trends in their value, and generating synthetic management information on risks.

The entire process is supported by myRisk.on software. This system provides a database of up-to-date information on risks associated with the company's operations and the NPS.

As part of continuous improvement of the organizational, process and technological solutions, initiatives are taken at PSE aimed at both increasing the efficiency and safety of the NPS and the company’s functioning, and at reducing and managing risks more effectively.

Corporate bodies and organizational units involved in the process

GRI 103-2

The activities that make up the risk management, both those undertaken as part of the operational and decision-making processes and those that are a part of the process of identification, assessment and monitoring of the risks that are most significant from the PSE's point of view, involve, among others the following:

Audit Committee of the Supervisory Board,
Management Board,
Managers of the company's organizational units,
Risk Management Office (BR).

The Audit Committee supports the Supervisory Board in overseeing the functioning of the risk identification and management systems.

The Management Board is responsible for establishing a systematic approach to risk management within the company. It approves the Risk Management Policy and reviews the periodic reports on risks associated with the PSE's operations and the actions taken to manage them.

Each manager of the company’s organizational unit is responsible for managing the business area assigned to this unit. An element of management activities undertaken is identification of risks and formulation as well as implementation of an approach to the management of risks that may affect the functioning of a given area and the achievement of its objectives.

The Risk Management Office is an organizational unit of the company responsible for providing the Management Board with a comprehensive view of the risks most relevant to the functioning of the NPS and the company. It ensures that a systematic approach to risk identification and assessment is in place, and it makes recommendations regarding risk management activities carried out by the individual organizational units of the company.

GRI 102-15

Risk register and selected risks at the end of 2020

The risk register includes risks that are most important from the PSE's point of view, and are key for the NPS functioning. According to the adopted methodology, the causes and effects are defined for each risk identified, and the frequency of risk materialization and its measure are estimated. In relation to the cause, which is understood as a specific event or circumstance whose occurrence may lead to the risk materialization, the frequency of occurrence and conditional probability of the risk materialization of risk after the occurrence of the cause (susceptibility) are determined. The effects are understood as all negative and positive consequences of the risk materialization. They are presented in 5 dimensions as follows:

financial and material,
related to the NPS operational continuity and quality,
related to image and law,
related to impact on health and life,
related to environmental impact.

The Company does not identify social and environmental risks – it only identifies the risks that may affect the social environment and the natural environment. This type of impact can manifest itself through identification of, for example, health and life impacts, environmental impacts, or image and law-related impacts.

Below is a summary of selected risks identified in 2020, including their impact on the social environment and the natural environment.

The approach to the management of all basic risks inherent in the activities of a transmission system operator, as implemented by PSE, primarily includes activities or solutions provided for in the Transmission Network Code (TNC) and the Guidelines for Electricity Transmission System Operation ( SOGL ). This approach is common to those risks identified below that involve any disruption to the transmission network. It includes all the master processes of the TSO, including, among others, processes of the transmission network development planning, operation planning and coordination (including cross-border exchange), network asset maintenance management, providing access to platforms and market mechanisms, with time horizons ranging from many years to real time.

Risk table

A widespread system failure (partial or total blackout) leading to a complete interruption or reduction of electricity supply to consumers

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
A system failure that results in a loss of continuity of electricity supply across the entire NPS (blackout). The range of the failure may be national or broader – regional (emergency interruption of supplies to consumers in a synchronous network with a possible division of the network into non-synchronous areas, including potential outage of synchronization along the Baltic–Adriatic line).	Electricity not delivered to end users Fatalities (due to a sudden loss of power supply to many public services – e.g. lighting and industrial systems Significant damage to the image on a national scale Potential environmental damage within the area beyond a buffer zone or the location of substations forming the NPS infrastructure, including damage resulting from the course of events leading to a blackout.	Ongoing monitoring of the level of compliance with network operational security criteria Ongoing removal of threats by changing the distribution of generation within the NPS Coordination of network outage planning Obtaining assistance from neighboring transmission system operators, through contingency supply agreements Installation and operation of automatic load-shedding systems National Power Dispatch Center (KDM) dispatcher training system Keeping back-up National and Area Dispatch Centers (KDMs and ODMs).

Introduction of power supply levels as a result of a long-term shortage of power in the NPS

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
The state of deteriorated NPS security and shortage of the available power and power reserves is permanent. In particular, there may be an overlap of circumstances such as the following: limited availability of generating units and transmission lines, low generation level; inability to sustainably and predictably cover the shortage with imported capacity or with the use of DSR, generation using RES or capacity market services. As a result, there is a need for forced demand reduction during peak load hours. Consequently, continuous or cyclic restrictions are imposed on the supply of electricity to consumers; power supply levels are introduced for long periods of time on a continuous basis or cyclically, on business days, for several hours a day.	Electricity not delivered to end users Significant damage to the image on a national scale.	Conclusion and performance of agreements on DSR services and non-centrally dispatched generating unit (nJWCD) availability service Obtaining assistance from neighboring transmission system operators, through contingency supply agreements Arranging overhaul schedules for generating units with generating entities Entering into capacity agreements with generating units as part of the capacity market.

Prolonged inability to transfer power from JWCD units due to network-related reasons

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
Inability to transfer power (for several weeks or months) from a key generating unit. Such a situation may be caused by the failure to complete a network-related project, or by a damage to a power plant substation/line that is difficult to repair, or by a substation/line unavailability due to deterioration of the technical condition or because of faults.	Increased cost of removing the constraints Damage to the image and negative campaigning, mainly in local media.	Ensuring undisturbed functioning of the network infrastructure through systematic maintenance actions and immediate removal of transmission infrastructure failures Planning and timely execution of investment tasks – construction and modernization of power lines and substations.

Loss of ability to manage THE NPS ON ANongoing BASIS

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
A major failure of a hardware or software component that causes IT systems directly supporting the processes in the area of real-time NPS operation management to temporarily or permanently lose their ability to support these processes. The reason for a failure may include a defect impossible to detect as part of standard procedures for checking a product usability (the so-called latent defect) or errors made at the stage of implementing a given system. In such a situation, there is a shift to manual management of the NPS using telephone lines. As a result, the security of the NPS deteriorates, and its susceptibility to human errors as well as a failure of telecommunication links increases. As a result, the TSO's ability to operate the network, dispatch generating units and manage the flow both within the network as well as at cross-border interconnections is significantly limited.	Cost of system repairs and restoring the connectivity Limited damage to the image.	In the design, construction and maintenance of systems, ICT infrastructure is used to support the operation of systems with high availability and criticality; this infrastructure is designed and executed with hardware and logical redundancy; technological processes are monitored on an ongoing basis in terms of maintaining operational continuity, among other things Periodic checks/inspections of the technical condition are carried out The adopted procedural solutions make it possible to maintain operational continuity in case of a loss of selected solutions comprising the NPS management system.

Successful cyber attack on key/critical systems

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
An external/internal entity takes actions to destroy, disable, affect the operation of, or seize data related to key/critical IT systems that provide PSE with the ability to control the NPS. As a result, there is a loss of controllability and associated impediments/constraints in ensuring safe operation of the NPS.	The cost of engaging specialized external companies to analyze the scale of the "losses” and weak points of the existing solutions, as well as to recommend and implement changes Significant effects on the image nationwide	The ICT Strategy (information and communication technology strategy) and the solutions/actions foreseen therein to ensure adequate levels of PSE's ICT security are applicable A number of technical and organizational solutions based on cybersecurity best practices is in place to enhance security and to prevent cyber attacks Continuous monitoring of IT/OT systems is conducted An ongoing monitoring of threats is carried out by a specialized unit with the Security Operation Center (SOC PSE), operating 24/7 The identified incidents are analyzed and clarified on a regular basis The Company is certified for Operational Continuity Management System in accordance with ISO 22301, and for Information Security Management System in accordance with ISO 27001.

Loss of use of key/critical PSE IT systems

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
Loss of use of key/critical PSE IT systems resulting from a cyber attack, technical failure, physical damage or a human error. This results in a situation where it is impossible for dispatchers to monitor the condition of the NPS on an ongoing basis or to make changes to the same. This may subsequently lead to disturbances in the NPS operation.	Cost of purchase/replacement of damaged infrastructure components Significant effects on the image nationwide.	The ICT security measures mentioned before Hardware and logical redundancy of ICT infrastructure supporting the operation of systems with high availability and criticality Ongoing monitoring of technological processes using ICT infrastructure Procedures to maintain operational continuity in the event of a loss of selected components of systems used to manage the NPS A system for training employees responsible for ICT systems./li>

Risk of increase in balancing market costs

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
A situation in which there is a significant increase in the cost of removing system and network constraints compared to the level planned in the TSO Tariff for a given fiscal year. It exists for a period of approximately 6 months and may potentially, in extreme cases, also translate into a deterioration of the Company's liquidity.	A sustained increase in the cost of removing system constraints over the medium term (several weeks or months). Serious effects on the image accompanying a possible request from the TSO to the ERO to increase the level of the transmission tariff (in order to cover increased costs).	The Company's financial exposure resulting from the operation of the balancing market mechanisms is monitored on an ongoing basis A system solution is available, which provides for a possibility to submit a request for the Tariff adjustment to the ERO President during the year Formulation of TNC revision sheets, if any, and submission of an appropriate request to the ERO President.

Failure to complete key projects for the power output system / improvement of power supply conditions on time

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
As a result of events/conditions occurring during the planning or execution phase of the investment tasks that make up the PSE's project portfolio, there are delays when compared to the baseline schedules for a significant portion of the projects. As a result, there are increased costs associated with the need to ensure project management, as well as – depending on the causes of disturbances in the investment processes – other costs directly incurred as part of the implementation of a given project (increase in the project budget due to the extension of the line route, the need to meet additional requirements in terms of applied technologies or safety systems). The foregoing may result in difficulties in the power transfer from the existing/new units (including JWCD units), and may limit the scale of the funding (EU subsidies) obtained by PSE to support the implementation of network projects.	Increased costs of the investment process management, as well as investment costs related to, for example, changing the route of the line or applying more costly technological solutions Significant effects on the image nationwide.	A unified model of investment task management is used, including, among other things, management of the project schedule and budget, management of agreements with contractors and subcontractors, identification and assessment of risks at the project level, management of deliveries, planning and approving shutdowns, tracking of deviations from the contractual schedule and reasons for their occurrence, planning and management of changes in the project and in the agreement with the contractor, planning of the technical elements of the investment process (e.g. schedules of safety system settings, schedules of FATs, planning of acceptance of documentation and the NPS network elements).

Damage to a critical substation facility

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
Substation infrastructure is affected by incidents such as: vandalism/theft, incidents related to improper execution of works by external companies engaged by the Company. Moreover, the infrastructure is exposed to progressive degradation of its technical condition. There may also be failures/damage to the individual components or parts of the substation. As a result, critical substation facilities (critical to the proper functioning of the substation infrastructure) may be damaged/destroyed. This damage can affect a single substation, but it can also be more widespread and affect a larger number of critical substation infrastructure elements important to the operation of the power grid over a large area of the country. The occurrence of such a situation may lead to significant losses in substation assets and, at the same time, to limitations to the proper conduct of transmission activities.	Cost of repairing damage to the substation assets Physical injuries (bodily injuries), loss of life to outsiders present at the substation during the incident Serious local and nationwide effects on the image.	Periodic assessments of the technical condition of the substation equipment are carried out Preventive replacement of the most worn-out and oldest network assets is carried out Operation of the substation is performed by employees with experience and competences necessary to ensure safe and correct operation and maintenance Necessary physical security and substation access restriction solutions are applied at substation facilities The ability to quickly remove failures (external and in-house resources) is provided.

Damage to a critical line facility

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
Line infrastructure is affected by incidents such as: vandalism/theft, incidents related to animal activity or improper execution of works by external companies engaged by the Company. Moreover, the infrastructure is exposed to progressive degradation of its technical condition. As a result, line infrastructure elements critical to the proper functioning of the transmission network may be damaged/destroyed. The damage may affect a single important element of the line infrastructure (a considerable fragment of a single line critical from the point of view of correct functioning of the NPS), but it may also be broader, and concern the power grid over a significant area of the country. The occurrence of such a situation may lead to significant losses in line assets and, at the same time, to limitations to the proper conduct of transmission activities.	Cost of repairing identified damage to the line assets Physical injury (bodily injuries), loss of life to persons in the vicinity of the incident site Serious effects on the image, both local and nationwide Negative impact on the balance of the environment directly in the area of the buffer zone of the line.	Periodic assessments of the technical condition of line infrastructure components are carried out Preventive replacement of the most worn-out and oldest network assets is carried out Supervision is carried out in relation to external companies performing work at line facilities The ability to quickly remove failures (external and in-house resources) is provided..

Social conflicts preventing/obstructing timely implementation of key projects

Risk description – basic information	Main effects of risk materialization (distinguishing between environmental and social impacts)	Approach to risk management ─ key assumptions
There are social conflicts concerning key investment tasks forming the PSE project portfolio. Unmitigated investment conflicts can further lead to impediments to network projects, including significant delays against the assumed schedules. It is possible to have simultaneous conflicts in many projects of key importance to the NPS.	Costs related to taking actions to resolve conflicts Occurrence of physical injuries in situations of uncontrolled escalation of conflict situationsSerious local and nationwide effects on the image.	Selection of optimal route and location of projects in order to reduce the risk of social conflicts (consultations with the participation of local communities) Development and implementation of social communication programs at the level of individual projects (including dialog with stakeholders) Supervision of public communication activities carried out by project contractors.

GRI 103-1

Additionally, PSE, in cooperation with ENTSO-E, participated in defining scenarios of a regional electricity crisis, including those conditioned by environmental factors, such as:

extremely low temperatures,
violent storms and hurricanes,
heavy rains and floods,
heat waves,
drought.

Preventive actions are being implemented at PSE due to the risk of loss of continuity of the company’s operations as a result of the COVID-19 pandemic. The Crisis Team established in late January 2020 in cooperation with the Management Boards, regularly takes necessary actions appropriate to the situation, including the following:

analyses are conducted on the development of the epidemic and its impact on the company, and recommendations are formulated on undertakings necessary to ensure continuity of the company's operations and undisturbed operation of the NPS,
restrictive precautions against virus infection are in place at the PSE facilities: mutual location separation of key teams in each organizational unit, segmentation of buildings with critical workplaces related to transmission of electricity and maintenance of network infrastructure, as well as separation of key employees responsible for cybersecurity and operation of the telecommunications network,
modified work organization is used in all locations and organizational units of the company; all employees and contractors are regularly informed about health and safety issues, and how to behave in case of a suspected virus infection,
technical and IT solutions are implemented and used to enable remote work.