Annual Reports - RTÉ

ANNUAL REPORT & GROUP FINANCIAL STATEMENTS 2007
21 Financial instruments (Group and RTÉ)
(a) Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
• credit risk
• liquidity risk
• market risk
This note presents information about the Group’s exposure to each of the above risks and the Group’s objectives, policies and
processes for measuring and managing risk.
The RTÉ Authority has overall responsibility for the establishment and oversight of the Group’s risk management framework and has
approved policies for the main areas of financial risk faced by the Group.
Group Treasury is responsible for managing all treasury activities, in accordance with the treasury policies, including cash management,
foreign exchange risk and counterparty credit risk.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers and deposit investments.
Given the nature of the advertising and other markets within which RTÉ operates, RTÉ had significant exposures to individual
advertising agencies and other customers throughout the year. RTÉ’s policy is to assign limits to the aggregate amount of exposure to
each individual customer. These exposures and the related limits are subject to ongoing review and monitoring.
As significant cash balances are held and invested on a short-term basis, RTÉ is exposed to credit risk on amounts due from the
institutions with which it holds its bank accounts and transacts cash investment and derivative business. RTÉ’s policy is to limit its
exposure to each financial institution, primarily depending on its credit rating.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. RTÉ’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its financial liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group’s policy is to invest excess cash, primarily term deposit accounts, spread over a number of institutions.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates or interest rates, will affect the Group’s income
or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return.
The majority of RTÉ’s business is transacted in Ireland. Consequently, operating and investing cash flows are substantially denominated
in Euro. Foreign currency exposures arise primarily from payments for acquired programmes and sports rights in US dollar and Sterling.
RTÉ’s policy is to have the majority of its committed principal foreign currency exposures commercially hedged at the beginning of
each financial year by entering into US dollar and Sterling forward contracts. All forward contracts have a maturity date of less than
12 months from the balance sheet date.
RTÉ decides whether to apply hedge accounting to its derivative financial instruments on a transaction by transaction basis. Hedge
accounting has not been applied to any of the Group’s derivative financial instruments at 31 December 2007 or 31 December 2006.
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