SEC Form 20-IS - iRemit Global Remittance

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The main risks arising from the Parent Company’s financial instruments are credit risk, foreign
currency risk, cash flow interest rate risk, and liquidity risk. The BOD reviews and approves
policies for managing each of these risks and these are summarized below:
Credit Risk
Credit risk is the risk of loss resulting from the failure of a borrower or counterparty to perform its
obligations during the life of the transaction. This includes risk of non-payment by borrowers or
issuers, failed settlement of transactions and default on contracts.
The nature of its business exposes the Parent Company to potential risk from difficulties in
recovering transaction money from foreign partners. Receivables from foreign offices and agents
arise as a result of its remittance operations in various regions of the globe. In order to address
this, the Parent Company has maintained the following credit policies: (a) implement a contract
that incorporates a bond and advance payment cover such that the full amount of the transaction
will be credited to the Parent Company prior to their delivery to the beneficiaries, which applies
generally to all new agents and in certain cases to old agents; (b) all foreign offices and agents
must settle their accounts within the agreed credit terms, otherwise, the fulfillment or delivery of
their remittance transactions will be put on hold; (c) evaluation of individual potential partners and
preferred associates’ creditworthiness, as well as a close look into the other pertinent aspects of
their partners’ businesses which assures the Parent Company of the financial soundness of their
partner firms; and (d) receivable balances are monitored daily by the regional managers with the
result that the Parent Company’s exposure to bad debts is not significant.
The Parent Company’s receivables from agents and courier companies are highly collectible and
have a turnover ranging from 1 to 5 days and 30 to 60 days, respectively. The other receivables,
which include advances to related parties, are also highly collectible and are due in less than one
year.
The table below shows the maximum credit exposure of the Parent Company per account
classification as of December 31, 2011 and 2010 (see Notes 6, 7, 8 and 12):
2011 2010
Loans and receivables:
Cash and cash equivalents* P=642,750,978 P=685,920,368
Accounts receivable
Other receivables
996,803,102 1,115,685,946
Related parties 137,260,244 97,767,888
Advances to officers and employees 2,526,259 2,991,428
Noncontrolling shareholders – 39,981,243
Others
Other noncurrent assets
3,457,329 1,166,686
Refundable deposits 4,568,661 4,099,931
Total
* excludes cash on hand
P=1,787,366,573 P=1,947,613,490
*SGVMC116501*