Annual Report Gorenje Group 2009

GROUP - 5. FINANCIAL RISK MANAGEMENT
In respect of financial risk management, the internal financial policies comprising the bases for efficient
and systematic risk management were observed in 2009. The objectives of risk management are:
• to achieve stability of operations and to reduce risk exposure to an acceptable level,
• to increase the value of companies and the impact on their financial standing,
• to increase financial income and/or to decrease financial expenses, and
• to nullify and/or decrease the effects of exceptionally damaging events.
In the Gorenje Group, the following key financial risks have been defined:
Financial risk
• Credit risk
• Currency risk
• Interest rate risk
• Liquidity risk
The exposure to each of the above risks and the hedge measures to be applied are judged and
implemented on the basis of their effects on the cash flows. To hedge against financial risks in the
course of ordinary business activities, relevant hedging activities have been conducted in the area of
operating, investing and financing activities.
In the light of the strained macroeconomic situation, more attention was paid in 2009 to the credit risk
which includes all risks where the failure of a party (a buyer) to discharge contractual obligations
results in a decrease in economic benefits of the Group. The credit risk was managed by application of
the following sets of measures:
• insurance of a major portion of operating receivables against credit risk with Slovenska
izvozna družba - Prva kreditna zavarovalnica, d.d., and other insurance companies;
• additional collateralisation of more risky trade receivables by bank guarantees and other
security instruments;
• regular monitoring of operation and financial standing of new and existing business partners,
and limitation of exposure to certain business partners;
• implementation of mutual and chain compensation with buyers;
• systematic and active control of credit limits and collection of receivables.
Taking into account the above mentioned hedge measures, the Gorenje Group's management
estimates that the exposure to credit risk has increased.
With regard to the geographic diversification of its operations, the Gorenje Group is strongly exposed to
currency risk, which is the risk that the economic benefits of an entity may be decreased due to
changes in foreign exchange rates. When assessing the risks, balance sheet exposure has been
considered. The currency risk mainly results from the performance of business activities in the markets
of Serbia, Great Britain, Czech Republic, Slovakia, Poland, Hungary, Croatia, Turkey and the US dollar
markets. A greater attention was paid to natural hedging of currency risks and harmonisation of
business operations to ensure long-term decrease in currency fluctuation exposure by matching or
netting sales and purchases. Additional short-term hedging is carried out by currency future contracts
and short-term borrowings in local currencies. Irrespective of measures taken to hedge against
currency risk, the Gorenje Group’s management estimates that, due to significant macroeconomic
changes and oscillations in particular in the East European countries, the exposure to currency risk has
increased.
In the last few years, great attention was paid to interest rate risk, which is the risk that the economic
benefits of the Group may be decreased due to changes in interest rates in the market. In 2009 the
volume of hedging against interest rate risk was decreased over the previous year’s figure, so that the
share of fixed interest rates and derivatives hedging against interest rate risk amounted to 47.5 percent
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Annual Report Gorenje Group 2009