Annual Review 2012 - Luxottica

Consolidated financial statements - NOTES
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Usually, the bank counterparties are selected by the Group Treasury Department and
cash availabilities can be deposited, over a certain limit, only with counterparties with
elevated credit ratings, as defined in the policy.
Operations with derivatives are limited to counterparties with solid and proven
experience in the trading and execution of derivatives and with elevated
credit ratings, as defined in the policy, in addition to being subordinate to the
undersigning of an ISDA Master Agreement. In particular, counterparty risk of
derivatives is mitigated through the diversification of the counterparty banks with
which the Group deals. In this way, the exposure with respect to each bank is
never greater than 25 percent of the total notional amount of the derivatives
portfolio of the Group.
During the course of the year, there were no situations in which credit limits were
exceeded. Based on the information available to the Group, there were no potential
losses deriving from the inability of the above mentioned counterparties to meet their
contractual obligations.
(d) Liquidity risk
The management of the liquidity risk which originates from the normal operations
of the Group involves the maintenance of an adequate level of cash availabilities
as well as financial availabilities through an adequate amount of committed credit
lines.
With regard to the policies and actions that are used to mitigate liquidity risks, the
Group takes adequate actions in order to meet its obligations. In particular, the
Group:
• utilizes debt instruments or other credit lines in order to meet liquidity requirements;
• utilizes different sources of financing and, as of December 31, 2012, had unused
lines of credit of approximately Euro 1,200.0 million (of which Euro 500.0 million are
committed lines);
• is not subject to significant concentrations of liquidity risk, both from the perspective
of financial assets as well as in terms of financing sources;
• utilizes different sources of bank financing but also a liquidity reserve in order to
promptly meet any cash requirements;
• implements systems to concentrate and manage the cash liquidity (Cash Pooling)
in order to more efficiently manage the Group financial flows, thereby avoiding the
dispersal of liquid funds and minimizing financial charges; and
• monitors, through the Treasury Department, forecasts on the utilization of liquidity
reserves of the Group based on expected cash flows.