CG malls europe - Commerz Real

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Commerz Real Estate Master FCP – SIF
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT DECEMBER 31, 2009
3. Financial risk management
3.1. Financial risk factors
The risk management function within the Group is carried out in respect of financial risks. Financial risks are risks
arising from financial instruments to which the Group is exposed during or at the end of the reporting period. Financial
risk comprises market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.
The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure
to risks stays within these limits.
Risk management is carried out by the financial controller of the Group under policies approved by the Board of Directors.
The fund controller identifies and evaluates financial risks in close co-operation with the Group’s operating units.
The Board provides written principles for overall risk management, as well as written policies covering specific areas,
such as interest rate risk, credit risk, and investing excess liquidity.
Key financial risk management reports are produced monthly on a Group level and provided to the key management
personnel of the Fund.
The Group’s activities expose it to a variety of financial risks, including; market risk (including fair value interest rate
risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. This note presents information about the
Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing
risk, and the Group’s management of capital.
The financial risks are related to the following financial instruments: trade receivables, cash and cash equivalents, trade
and other payables and borrowings.
(a) Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market prices. The Group’s market risks arise from open positions in interest-bearing assets and liabilities, to the
extent that these are exposed to general and specific market movements. Management sets limits on the exposure to
interest rate risk that may be accepted, which are monitored on a monthly basis. However, the use of this approach does
not prevent losses outside of these limits in the event of more significant market movements. Currently the Group is not
exposed to market risk with respect to financial instruments as it does not hold any equity securities.
Sensitivities to market risks included below are based on a change in one factor while holding all other factors constant.
In practice this is unlikely to occur, and changes in some of the factors may be correlated – for example, changes in
interest rates and changes in currency rates.
(i) Price risk
The Group has no significant exposure to price risk as it does not hold any equity securities or commodities.
The Group is exposed to price risk other than in respect of financial instruments, such as property price risk including
property rentals risk (note 5).