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32B Financial instrument risksRisk managementStrategic risk management is undertaken by Council through the monitoring of regular risk reports provided by management.These reports highlight potential areas of risk, and the steps that are being followed to ensure the risks are appropriately managed.The Finance department provides treasury management services for WelTec, co-ordinating the access to domestic and international financial markets andmanagement of the financial risks relating to the operations of the business.WelTec does not enter into, or trade financial instruments for speculative purposes.Details of significant accounting policies and methods adopted, including the criteria for recognition, and the basis of measurement applied in respect ofeach class of financial asset, financial liability and equity instrument are disclosed in the Accounting Policies section of these financial statements.Currency riskWelTec has no material exposure to movements in foreign exchange rates. Income sourced from overseas is received in New Zealand dollar equivalents,while trading supplies sourced from international providers are not a material portion of WelTec’s annual expenditure. Council Policy on foreign exchangestates that should an international purchase of $20k or more be required, investigation is made into forward cover. At balance date no forward contracts orany other form of hedging exist.Credit riskCredit risk exposure for WelTec exists principally within cash and cash equivalents, and trade and other receivables balances.Credit risk in respect of cash holdings is managed by spreading short term investment deposits with the major trading banks within New Zealand, whileensuring WelTec receives the best return on the funds invested, as specified by Council Policy. Receivable balances are unsecured. They are stated attheir estimated realisable value after providing for amounts not considered recoverable.The maximum credit exposure for each class of financial instrument is as follows:GROUP 2012 Actual$000GROUP 2011 Actual$000PARENT 2012 Actual$000PARENT 2011 Actual$000Cash and cash equivalents 8,711 16,214 8,495 16,181Trade and other receivables 7,166 7,215 6,878 7,318Total credit risk 15,877 23,429 15,373 23,499The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to Standard and Poor’s credit ratings(if available) or to historical information about counterparty default rates:GROUP 2012 Actual$000GROUP 2011 Actual$000PARENT 2012 Actual$000PARENT 2011 Actual$000Counterparties with credit ratingsCash and cash equivalents AA- rating 8,711 16,214 8,495 16,181Total cash and cash equivalents 8,711 16,214 8,495 16,181Counterparties without credit ratingsTrade and other receivables with nodefaults in the past7,166 7,215 6,878 7,318Total trade and other receivables 7,166 7,215 6,878 7,318Liquidity riskWelTec manages liquidity risk by maintaining adequate reserves to ensure the provision of educational services for the foreseeable future. Thisis completed by continuously monitoring and forecasting cash flows for the medium term. The maximisation of operational inflows and efficientmanagement of operational and investing outflows ensures sufficient cash reserves are maintained.Contractual maturity analysis of financial liabilitiesThe table below analyses financial liabilities into relevant maturity groupings based on the remaining period at the balance date to the contractualmaturity date.2012 ANNUAL REPORT | 79