Annual Report 2008-2009 - Emirates.com

Dnata
136
24. Financial risk management (continued)
The following sensitivity analysis shows how profit and equity would change if the market risk variables had been different on the
balance sheet date with all other variables held constant and has been computed on the basis of assumptions and indices used and
considered by other market participants.
Interest cost
- 100 basis points
Singapore Dollars
Swiss Francs
+ 100 basis points
Singapore Dollars
Swiss Francs
Interest income
- 100 basis points
+ 100 basis points
Currency - Singapore Dollars
+ 1%
- 1%
Currency - Swiss Francs
+ 1%
- 1%
(ii) Credit risk
AA- to AA+
A- to A+
Lower than A-
Effect on
profit
2009
AED'000
2,436
2,919
5,355
Effect on
equity
2,436
2,919
5,355
Effect on
profit
2008
AED'000
2,698
1,204
3,902
Effect on
equity
2,698
1,204
3,902
(2,436) (2,436) (2,698) (2,698)
(2,919) (2,919) (1,204) (1,204)
(5,355) (5,355) (3,902) (3,902)
-
-
(473) (1,054)
473 1,054
(2,031) -
2,031
-
(2,660)
2,660
22,979
1,325,926
167
-
-
(2,609)
2,609
Policies are in place to ensure that sales are made to customers with an appropriate credit history failing which an appropriate level of
security is obtained, where necessary sales are made on cash terms. Credit limits are also imposed to cap exposure to a customer.
The table below presents an analysis of short term bank deposits and cash and cash equivalents by rating agency designation at the
balance sheet date based on Standard & Poor's ratings or its equivalent for the main banking relationships:
(473)
473
-
-
(1,054)
1,054
(3,186)
3,186
Dnata is exposed to credit risk, which is the risk that the counterparty will cause a financial loss to Dnata by failing to discharge an
obligation. Financial assets which potentially subject Dnata to credit risk consist principally of deposits with banks and trade
receivables. Dnata uses external ratings such as Standard & Poor's, Moody's or their equivalent in order to measure and monitor its
credit risk exposures to financial institutions. In the absence of independent ratings, credit quality is assessed based on
counterparty's financial position, past experience and other factors.
Dnata manages limits and controls concentration of risk wherever they are identified. Exposure to credit risk is managed through
regular analysis of the ability of counterparties and potential counterparties to meet their obligations and by changing their limits where
appropriate. Approximately 28% (2008: 33%) of cash and bank balances are held with financial institutions under common control.
2009 2008
AED'000 AED'000
48,214
1,334,510
-