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Credit risk
Credit risk is the risk that a third party will
default on its obligation to the Health and
Disability Commissioner, causing the Health
and Disability Commissioner to incur a loss.
Due to the timing of its cash infl ows
and outfl ows, the Health and Disability
Commissioner invests surplus cash with
registered banks.
The Health and Disability Commissioner’s
maximum credit exposure for each class
of fi nancial instrument is represented by
the total carrying amount of cash and cash
equivalents (note 6), and net debtors
(note 7). There is no collateral held as
security against these fi nancial instruments,
including those instruments that are
overdue or impaired.
The Health and Disability Commissioner has
no signifi cant concentrations of credit risk,
as it has a small number of credit customers
and only invests funds with registered
banks with specifi ed Standard and Poor’s
credit ratings of AA or better.
Liquidity risk
Liquidity risk is the risk that the Health and
Disability Commissioner will encounter
diffi culty raising liquid funds to meet
commitments as they fall due. Prudent
liquidity risk management implies
maintaining suffi cient cash, the availability
of funding through an adequate amount of
committed credit facilities and the ability to
close out market positions. The Health and
Disability Commissioner aims to maintain
fl exibility in funding by keeping committed
credit lines available.
In meeting its liquidity requirements,
the Health and Disability Commissioner
maintains a target level of investments that
must mature within specifi ed time frames.
Sensitivity analysis
As at 30 June 2012, if the deposit rate
had been 50 basis points higher or lower,
with all other variables held constant, the
surplus/defi cit for the year would have
been $5,000 (2011: $8,150) higher/lower.
This movement is attributable to increased
or decreased interest expense on the
cash deposits.
The table below analyses the Health
and Disability Commissioner’s fi nancial
liabilities into relevant maturity groupings
based on the remaining period at the
balance sheet date to the contractual
maturity date. Future interest payments on
fl oating rate debt are based on the fl oating
rate at the balance sheet date. The amounts
disclosed are the contractual undiscounted
cash fl ows. The contractual undiscounted
amounts equal the carrying amounts.
HDC ANNUAL REPORT 2012
67