Key risks identified at the LOTOS Group

• Performing long-term trend analyses and updating strategy to mitigate adverse effects or seize new opportunities to gain a competitive advantage (e.g. in electric mobility)
• Implementation of development pojects to expand and diversify the existing asset portfolio
• Implementation of development projects to improve the flexibility of production/refinery processing operations and energy efficency
• Implementation of innovation projects

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• Undertaking new initiatives and projects, such as advanced biofuels, alternative fuels, e.g. hydrogen, LNG, CNG, as well as energy efficency projects – measures to reduce emissions and increase the share of energy from renewable sources

• Commitment to research and development projects aimed at development projects aimed at developing solutions with a favourable impact on the environment and climate change

• Monitoring and active participation in legislative processes (presentation of analyses, proposing regulatory solutions beneficial to the organisation), both at the EU and national level – for the LOTOS Group, key climate risks relate to its transformation and pertain to regulatory changes

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• Development of a compliance management system by the Compliance Department and External Regulation Department
• Monitoring new regulations and regulatory changes
• Active participation in legislative dialogue led by the Regulator and non-governmental organisaions
• Scenario analyses of possible regulatory impacts
• Implementation of measures for adapting to planned or enacted regulatory changes
• Setting up interdisciplinary working teams to make the most of potential opportunities

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• Comprehensive, step-by-step project planning
• Qualification of contractors
• Project risk management
• Monitoring of progress made on projects, forecasting of project parameters, and mitigation of emerging risks
• Active project management, including close oversight and communication with contractors

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• the LOTOS Green H2 programme involving the construction of a largescale plant consisting of electrolysers, hydrogen storage facilities and fuel
  cells or, possibly, hydrogen turbines, controlled with the use of advanced software
• Vetni project designed to construct a pilot unit for high-efficiency hydrogen production based on solid oxide electrolysers powered by RES
• potential production of green hydrogen on an offshore platform in an integrated system using purified seawater electrolysis and floating wind turbine

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• Execution of a letter of intent with PKN Orlen S.A. and Energa S.A. to analyse the feasibility and possible terms of a joint project to build a CCGT plant in Gdańsk

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• Diversification of crude oil supplies in terms of both directions of supply and means of transport used (e.g. maintaining the availability of supply sources for oil supplied by pipeline and by sea)
• Maintaining adequate levels of work-in-process stocks
• Production scheduling and procurement planning
• Providing for relief measures in supply contracts in case a delivery route becomes unavailable
• Following the adopted oil procurement policy

• Building an engaging work environment to enhance productivity
• Creating space for development and innovation within the organisation
  (activities of the LOTOS Academy, financing of training and higher
  education, possibility of participating in the PhD Theses Implementation Programme)
• Building a good employer image inside and outside the organisation
• Building a knowledge management system to enable effective knowledge sharing/transfer and develop staff competencies necessary to achieve near- and long-term business goals

• Following the adopted feedstock and petroleum product price risk management policy and currency risk management policy
• Monitoring market risk exposure on a daily basis
• Selecting a trading strategy in line with policy objectives, current market situation and applicable risk limits

• Assessing and forecasting the Group’s cash flows and liquidity
• Analysis of financing sources available to the Group
• Diversification of financing sources.
• Optimising liquidity and debt across the Group
• Effective management of strategic project portfolio

• Monitoring of partners’ ratings and financial standing
• Setting trade credit limits and limits for counterparties in financial contracts in accordance with internal procedures
• Employment of diverse financial tools to minimise risk

• Conduct of geological and reservoir engineering studies depending on the well (exploratory, appraisal, or appraisal and production well)
• Decision points included in the project (initial phase, execution phase, well results analysis and reservoir evaluation, design phase) to minimise dry well risk
• Applying international probability-of-success (PoS) standards
• Cooperation with experienced field operators on the Norwegian Continental Shelf

• monitoring of process parameters
• equipment performance tests
• use of appropriate safety measures
• compliance with applicable safety and operating procedures

• Reservoir analysis (updating integrated static and dynamic models)
• Assessing well and pump performance
• Workover of production wells
• Injection of chemicals (hydrate inhibitors) reducing the risk of downhole pump failures

• Inspecting the technical condition of processing equipment and components in line with maintenance schedules
• Risk-based inspections of infrastructure
• Having equipment inspected by the Technical Inspection Office and Company Technical Inspection
• Identifying Critical Equipment subject to special inspection rules
• Carrying out annual Failure Prevention Plans and Maintenance/Overhaul Plans
• Improving staff qualifications, including simulation-based training
• Automatic control, alarm and shutdown systems

• Ongoing analysis of demand change scenarios in each sales channel
• Adjustment of the refining product mix to market demand changes
• Standards of maintaining good relations with customers

• Raising employees’ and subcontractors’ awareness of and commitment to safety culture
• Health and safety risk assessment and process risk analysis
• Regular inspections of OHS compliance at the workplace
• Implementation of the annual Health and Safety Plan for the LOTOS Group
• Supervision of subcontracting; operation of the contractor portal (with updated procedures and guidelines for subcontractors performing on-site work at Grupa LOTOS S.A.)
• Given the air transport of crews to offshore drilling platforms, with respect to aviation accident risk:
• • o high safety requirements for aircraft fleet – AOC and E12 certificates, IFR approval,
  • o ongoing monitoring of weather conditions and proper logistics of passenger transport by sea,
  • o supervision of the terms of contracts with carriers.

• Continuous improvement of the Process Safety Management (PSM) system
• Implementation of change management policies and procedures
• Risk analysis for each upgrade and new build project
• Process safety training for personnel
• Occupational safety instructions and procedures
• Registration and reporting of process safety incidents

• Periodical drills to check security and communication systems
• Implemented procedures in case of physical security or protection breaches
• Participation in the Government Centre for Security’s training
• Communication with the Provincial Emergency Management Centre

• Implementation of the ISO 27001 system and Cybersecurity Act requirements
• Implementation of the Cybersecurity Rules at the LOTOS Group
• Use of internal system security management procedures
• IT security audits
• Regular security tests for ICT infrastructure
• Raising employees’ awareness of cyber security issues (training, information, tests)
• Cooperation with CERT ABW Computer Security Incident Response Team
• Operation and development of the Security Operation Centre (SOC) Office

• Supplier selection procedures
• Rules for dealing with key suppliers
• Maintaining good relations with suppliers based on transparent procedures

• Application of the split payment mechanism
• Detailed checks of trade partners
• Inclusion of relevant clauses in contracts with trade partners
• Due diligence

• Operation of the LOTOS Group’s Misconduct Prevention Policy, defining a systematic approach to misconduct prevention, including the rules of handling reported or suspected cases of misconduct and methods of communication.
• Operation of the Compliance Management Policy at the LOTOS Group
• Operation of the Ethical Conduct Programme, which is pursued through the Code of Ethics, the Ethics Officer and the Ethics Hotline, as well as training activities.
• Operation at Grupa LOTOS S.A. of the policy for anonymous reporting of potential or actual violations of law to the President of the Management Board and, in special cases, to the Supervisory Board
• Application of the LOTOS Group’s gift policy
• Conducting audits and inspections

• Application of internal data protection standards, including as part of personal data protection procedures and the security policy
• Audits, also by external auditors, to verify whether the organisation observes the applicable rules and how it is prepared to comply with the GDPR requirements
• Raising employees’ awareness (training, meetings)

• Working with shipowners that are members of the International Tanker Owners Pollution Federation Ltd. (ITOPF) and hold the required insurance certificates
• Insurance coverage and membership in the International Oil Pollution Compensation Fund (IOPCF)

• Maintaining offshore equipment in good technical condition to minimise the risk of accidents on rigs
• Taking steps to control the risk of formation fluid invasion at the stage of planning and conducting well drilling operations
• Holding annual drills in oil spill control
• Selecting the right anti-spill equipment
• Insurance coverage

• Constantly monitoring the process and emission parameters, including through a continuous emission monitoring system (CEMS) launched in 2020
• Maintaining high technical standards application of the best available techniques (BAT) requirements
• Implementation of environmental management plans

• Open communication with employees, trade unions and Works Council about the planned changes
• Communicating the changes to media
• Opportunities for employees to gain new qualifications/ retrain
• Offering support in the event of a change of workplace and relocation; financial assistance
• Ongoing monitoring of employee sentiment

• Maintaining good relations with stakeholders. Holding meetings to inform stakeholders about the Group’s projects
• Open communication on the Group’s current operations and projects
• Maintaining good relations with industry, local, nationwide and foreign media
• Working with the supervisory bodies and public authorities to prevent crises that may arise in the course of legislative procedures, whether Polish or EU.
• Supporting local communities through various CSR programmes/projects