Financial risks are monitored on three levels: 

• By operational staff and managers;
• By internal controllers, under the responsibility of each entity's CEO;
• By control bodies (Renault's Internal Audit or external auditors).    

Each level has its own monitoring, control and monthly reporting resources.

Exchange rate risk

Definition
Exchange rate risk is the risk of fluctuations in exchange rates affecting the company's financial position in terms of the income statement or balance sheet.

Automobile business

The Automobile Division is exposed to exchange rate risk as part of its manufacturing and commercial activities. 

Movements in exchange rates can affect:

• Operating margin;
• Financial items;
• Income of associated companies;
• Net debt.    

These risks are monitored centrally by Renault's Corporate Treasury Department. Foreign exchange transactions are carried out by Renault Finance, a subsidiary dedicated to carrying out market transactions for the automobile business.

Sales financing business

Sales financing subsidiaries are required to raise financing in their own currency. As a result, they are not exposed to exchange rate risk.
However, residual and temporary foreign exchange positions may remain. These are monitored daily, and are systematically hedged.

At December 31, 2007, the foreign exchange position was around 2.3 M€.

Interest rate risk

Definition
Interest rate risk is the risk of movements in various interest rates affecting the company's financial position, in terms of debt and/or financial assets.

Interest rate risk is greatest in the sales financing activities of RCI Banque and its subsidiaries.

Day-to-day, interest rate risk is monitored:

• By measuring exposure by currency, management entity and asset portfolio;
• Through a single set of methods used by the entire RCI Banque group to ensure global management of interest rate risk across the entire scope of consolidation.     

The Group's strategy limits its exposure to interest rate risk.

Counterparty risk

Definition
Counterparty risk is the risk of a financial partner being unable to honor its obligations, causing losses or damages for Renault.

Counterparty risk affecting the Group's various entities is managed in a fully coordinated manner.

Several resources are used to control counterparty risk:

• Risk committees at the Group level use a system of ratings that assess each counterparty's risk and shareholders' equity;
• Consolidated monthly reporting is carried out, covering all counterparties.    

Liquidity risk

Definition
Liquidity risk is the risk that a company will not have the funds required to finance its activities.

The Group must always have sufficient financial resources not just to finance the day-to-day running of its business and its investments, but also to cope with any extraordinary events that may arise.

Renault S.A. finances its Automobile Division mainly by: 

• Raising long-term capital in the markets, through bond issues and placings;
• Issuing short-term debt instruments (commercial paper).    

In sales financing, RCI Banque has three types of financial resources:

• Bank facilities;
• Short- and medium-term bond issuance programs;
• Securitization program since 2002    

Commodity risk

Definition
Commodity risk is the risk of large movements in commodity prices.

To hedge its commodity risk, Renault's Purchasing Department uses various financial instruments, including forward purchase contracts.

All hedging decisions are monitored by a risk committee. All transactions are included in monthly reporting documents.

Transactions are executed by Renault Finance, which operates in the financial markets and carries out daily valuations of all hedging instruments used.

Credit risk

Definition
Credit risk is the risk of one of Renault's commercial partners being unable to honor its obligations, causing losses or damages for Renault.