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Management of operational and financial risks
financing credit risks, which are spread
across an even larger number of
customers, are managed using creditscoring
procedures. In addition, significant
individual credit risks are managed using
procedures similar to those applied to
manage wholesale financing credit risks.
Reserves are booked for residual risks, on
a statistical basis, as soon as the financing
is granted. The percentage of the total
risk covered by a reserve is adjusted at
regular intervals based on the Group’s loss
experience, determined country-bycountry.
Specific allowances are booked
for significant individual risks, as soon as
they are identified.
The bulk of the finance companies’
refinancing needs are covered by the
equity capital allocated to these
companies, the issuance of debt securities
and bank borrowings. The finance
companies are therefore exposed to the
risk of mismatches between assets and
liabilities, in terms of maturities, currencies
and interest rates. The Group’s policy
consists of neutralizing the impact of
changes in interest rates and exchange
rates on the finance companies’ operating
margin by using appropriate financial
instruments to match interest rates and
currencies between assets and liabilities.
The permanent need to have sufficient
resources to refinance the finance
business also exposes the Group to
liquidity risks. These risks are covered as
part of the financing strategy (see Group
Financing 1. above), by matching financing
maturities to the related assets, by using
free cash flow and unused confirmed lines
of credit, by extensively diversifying financing
resources and by maintaining adequate
capital ratios at Banque PSA Finance.
The Group is exposed to counterparty risks
on transactions carried out on financial
markets in connection with the management
of currency and interest rate risks and
payment flows. It keeps these risks to a
minimum through internal control
procedures that restrict the choice of
counterparties to leading banks and
financial institutions.
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PSA PEUGEOT CITROËN - MANAGING BOARD REPORT