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Corporate Governance

Compliance and Risk Management

GRI 102-11, 102-16, 205-3

Algar Telecom has a Code of Conduct and a number of corporate policies, such as Internal Controls, Relations with Government Agencies, Spokesmen, Institutional Representation, Giveaways and Tax Incentives. In addition, internal audits are carried out to check the level of compliance with existing controls, in-class and online training is given on ethics and integrity, and communication and awareness campaigns are conducted. Our executives play a crucial role in the Compliance Program, leading by example and practicing what they preach.

Our Code of Conduct guides the behavior expected in relationships with several publics and is shared with all employees, as they enter in the Company. Annually, employees formally attest that they have understood the guidelines, which ensures that periodic revisions in the document do not go unnoticed and all are properly updated. The Code of Conduct covers matters such as fighting corruption, rules for online behavior, working relationships and human rights, including non-acceptance of child labor and labor analogous to slavery by the Company and our partners.

Anyone who identifies a practice that may represent a departure from the Code of Conduct and/or laws and regulations may report the situation to the Ombudsman’s Office, administered by the internal audit, which assesses the origin and the criticism of the complaint. Confirmed deviations are reported to the Integrity Committee, which investigates and deals with the events. We guarantee confidentiality and anonymity and will not tolerate any kind of reprisal.

Risk Management

Risk management is handled by Algar Telecom’s Financial Office, which coordinates the work with the Company’s other areas and is supervised by the Audit and Risk Management Committee, one of the advisory committees to the Board of Directors. Algar Telecom’s Corporate Risk Management Policy defines the overall guidelines for this work, based on standards such as those of the internationally recognized COSO-ERM (Committee of Sponsoring Organizations of the Treadway Commission).

The procedure is in four stages: identifying the factors (causes) of the risks of purposes and their implications; assessing (calculating the impact on the projected results and the probability of occurrence); defining the risk appetite of shareholders; and developing action plans. The process is cyclical and is constantly updated.

One of the instruments that support the prioritization of risks to be addressed is the Risk Matrix, which provides a comparative view of the risks according to the classification of impact and probability by the Board and its classification. See the chart below summarizing the most important risks of Algar Telecom, for which the organization seeks mitigation.


Digital Rupture/Innovation – We operate in a highly dynamic business segment, where technological transformations can cause the breakdown of consolidated markets. Changes in consumer behavior do not only affect the supply of new products, as well as can modify the entire dynamic of a market – as has been the case with collaborative platforms for public transport and hotel accommodation. This is why we are aligned with digital changes and attuned to innovation. We have an Innovation Management area, a Transformation department and a Digital Services area. In addition, we are a founding member of Brain, an institute of science and technology inspired by the model of open innovation, and we created, in 2018, the Estação project, to provide the change of mindset of Algar Telecom employees and encourage disruptive solutions through multidisciplinary teams.

Competition – The entry of new competitors in the segment, as well as the increase of competitiveness are inherent risks to the business and can impact the fulfillment of our purposes. For this reason, we constantly monitor the competition environment, evaluate scenarios and potential impacts and then define strategies to defend the concession area and maintain growth in the expansion area.

Foreign Exchange – There is possibility of fluctuations in the exchange rate of foreign currencies that we use for the acquisition of equipment, supplies and for the contracting of financial instruments. A part of the investments is made in foreign currency, when equivalent national equipment is lacking. We maintain our updated foreign exchange exposure balance, monitor exchange rate fluctuations on a daily basis, negotiate better foreign exchange conditions in advance, and analyze the volume of investments in the country’s macroeconomic context, among other factors.

Interest Rates and Inflation – Indebtedness is monitored periodically through Sensitivity Analysis, which allows us to simulate the possible scenarios of exposure of financial instruments (loans, financing and debentures), as well as the impact on financial expenses and payment capacity. We permanently monitor indebtedness levels in accordance with market standards and compliance with covenants provided for in loan, financing and debenture agreements, which must be maintained for the duration of the respective documents. We also have our own indexes, which are even more stringent than those required in financial contracts.

EBIT Concentration – Dependence on a small number of customers, with a high share in the company’s revenue, margin and EBIT. The risk is monitored with the focus on de-concentration of EBIT and retention of the main customers at the base.

Cybersecurity – We have a portfolio with systems exposed to cyber security risks. To minimize these risks, we have solutions to protect us against intentional or accidental contamination, malware and viruses; a structure for detecting anomalies in our internal and external networks, cyber-attacks and anomalous traffic; and tools for controlling access to confidential data. In line with the purposes of Law 13709, enacted on August 14, 2018 (General Law on Personal Data Security), we began an effort to adapt processes and systems to ensure compliance with legal requirements and reinforce the cybersecurity environment.

Continuity of Operation – The continuity of the Company’s operations involves a set of technologies, systems, processes and people, in which eventual failures may occur, reducing or rendering us unable to provide adequate services to our customers. To reduce the risk of disruption in networks and services, the main internal or external factors causing outages are identified by analyzing occurrences of incidents previously detected in networks and telecommunications systems. The availability of network elements and services is continuously monitored through a Network Operations Center with technologies, systems and professionals trained to identify and treat incidents in the shortest possible time, reducing service downtime and impacts to customers and the Company.

Project Execution – The strategy is implemented through a portfolio of projects, which are managed through methodologies recognized by the market. Therefore, the risks inherent in the projects are mapped, mitigated and monitored. The Project Management Office (PMO) periodically reports the progress of the strategic projects to the Company’s Board of Directors. Created in 2018, the Estação project is based on agile methodology, which significantly favors the reduction of deadlines during the development of a project.

Regulatory – Regulatory risk is monitored from three viewpoints, which feed into each other: (I) regulatory changes (legislative issues affecting the sector); (II) management of grants (obligations to be met which are subject to oversight); and (III) management of penalties imposed by the sector regulatory agencies, Anatel and Ancine (administrative and judicial proceedings). Algar Telecom continues to participate in and contribute to the sector debates, in order to collaborate with the development of regulations in Brazil and the resulting benefits for society.

Tax – Tax risk, in an analogous way, is also monitored in three perspectives: (I) tax movements – draft laws that may impact the business upon becoming an enforceable obligation, including, for example, the increase in charges; (II) management of existing obligations, which must be fulfilled and are subject to supervision at the municipal, state and federal levels; (III) management of tax penalties and contingencies, constituted in accordance with accounting practices and audited periodically by independent auditors.

Labor – Labor risk is monitored in three perspectives: (I) movements of labor legislation – draft laws that may impact the business upon becoming an enforceable obligation; (II) management of current labor obligations, which must be complied with and are subject to supervision by the competent body; (III) management of labor contingencies established according to accounting practices and audited periodically by independent auditors.

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