ANNUAL REPORT 2008 - Gorenje Group

60
2008
3.10.2 FINANCIAL RISK MANAGEMENT
Financial risk control has pursued the internal financial policies including the starting points for
efficient and systematic management of financial risks.
The exposure and measures for hedging against them have been taken; it has been judged on the
basis of effects on cash flows. Suitable hedging activities have been carried out in scope of ordinary
activities in the operating, investing and financial areas.
FINANCIAL RISKS: credit risks; currency risks; interest rate risks; liquidity risks.
Due to the increasingly difficult macro-economic situation the attention paid to credit risks has
been concentrated and includes all risks reducing the economic benefits of the company due to
unsettlement of contractual obligations of business partners (customers). The control of exposure
by the sets of measures:
• security of the major part of operating receivables against credit risks with the
Slovene Export Company (Slovenska izvozna družba – Prva kreditna zavarovalnica,
d.d., and other insurance companies.
• Additional security of more risky receivables due from customers by mortgages,
bank guarantees, and other security instruments.
• Regular control of operation and financial position of all new and existing business
partners and limiting of exposure to individual business partners.
• Joint and chain offset with customers.
• Systematic and active control processes of credit overdrafts and collection of
receivables.
The management board of the Gorenje Group has assessed that the exposure to credit risks is
moderate due to the measures mentioned.
The Group is greatly exposed to currency risks due to the geographic diversification of operation,
where the economic benefits of the company may decrease due to changes in the exchange rate
of an individual currency. The exposure of cash flows and balance sheet has been considered in the
valuation of risks. These risks are high in the markets of Serbia, Great Britain, Czech Republic, Slovakia,
Poland, Hungary, Croatia and in all US $ markets. Regardless of the measures taken the management
board of the Gorenje Group has assessed that the exposure to currency risks is high
due to relevant macro-economic changes and fluctuations of mostly East- European currencies.
Great attention has been devoted to interest rate risks reducing the economic benefits of the company
due to a change in total interest rates in the market. The hedging scope has reduced and the
share of fixed interest rates and derived financial instruments accounts for 37.6 % of credit portfolio
of the Group at the end of the financial year 2008. The management board of the Gorenje Group
has assessed that the exposure to interest rate risk is high.
Liquidity risk includes risks associated with the lack of financial resources available and consequently
the inability of the company to settle its liabilities in the term-limits agreed. The financial liabilities of
the Gorenje Group amounting to EUR 278 million mature in the year 2009 and therefore discussions
with banks relating to the re-financing of the existing financial liabilities started in the last quarter of
the year 2008. Thus the refinancing risks reduced. A liquidity reserve amounting to EUR 76.6 million
including unused revolving lines and cash of the Group in banks provides short-term regulation of
cash flows and reduces short-term liquidity risks. The risk of short-term liquidity of the Group has
been assessed as increased due to efficient cash management, appropriate credit lines available
for short-term cash flow regulation, high financial flexibility and good access to financial markets
and resources. The reason for the increased risk is the reduction in financial resources available
from business partners (customers and suppliers). A long-term liquidity risk as a consequence of
successful operation, efficient asset management, sustained ability of generating cash flows from
operating activities and suitable equity structure has been assessed as moderate. The management
board of the Gorenje Group has assessed that the exposure to the liquidity risk is moderate.