Main risks and uncertainties during 2010

The Group is exposed to certain financial risks such as market risk (mainly foreign exchange and interest rate), credit risk, liquidity risk, capital risk and to risks arising from the overall financial recession and uncertainty facing the Greek and global market.

Regarding the financial risks associated with the volatility of the value of financial assets and liabilities, the Group is mainly exposed to:
> interest rate risk due to the existing loan liabilities at floating rate (mainly Euribor);
> foreign exchange risk due to the Group’s investments in the USA and also the strong volatility registered in Euro/USD rate.

In the context of the following risks management, Management and its authorized officers establish the procedures and policies required for the effective prevention and management of each separate risk. They also see to the effective implementation of the procedures and arrangements provided for this effect and in particular they:

> take steps to ensure equity adequacy in relation to the Group's financing exposures;
> record the policy of approaches and value calculation methods involving exposures and adjustment of such value and provisions;
> apply a stress testing plan and special sensitivity analyses based on which they assess the Group’s exposure to such risks in quantity terms;
> study the potential to use or acquire financial instruments or risk hedging tools.

The Group’s exposure to liquidity and credit risks were less important during the period the financial statements were prepared but are certainly risks depending in the future on the risks arising from the overall financial environment of the Group and the prospects of the Greek and global market.

In the context of credit and liquidity risk management, the Board of Directors establishes the special controls, procedures and policies required for effective prevention and management of such risks.

Note that as regards the credit risk, the Group sells its products on a wholesale basis mainly to customers with a well-assessed credit record and high diversification of their balances. Most of the sales are sales to pharmacies. According to its policy, the Group works only with reliable customers. Regarding liquidity risk, the Board of Directors cooperates mainly with the Financial Division in order to manage its liquidity needs by closely monitoring the scheduled payments for long-term liabilities and cash outflows from its everyday activities. Liquidity needs are monitored at different time zones (daily, weekly, monthly basis). The Group keeps cash and highly-liquid investments so as to meet liquidity needs for up to 30 days.

In a wider sense, the Group is exposed to the risks arising from the overall financial recession and uncertainty facing the Greek and global market. In the context of this fluid and volatile financial condition, the Group has taken the advisable steps to respond to the new circumstances and take advantage of the new market conditions. The said actions are detailed above in paragraph (d) of this report.