Annual REPORT

3.3 Credit risks
Credit risks can arise from the following balance sheet positions: cash and cash
equivalents, receivables and advance payments, and financial assets. Charles
Vögele Group is not exposed to any material credit risk since the vast majority of
sales to customers are settled in cash or by the major debit and credit cards.
Processing and payment is carried out through local financial services providers
within two or three days. Financial institutions and financial services providers
usually have to have at least an “A” rating before Charles Vögele Group will consider
using them for banking business. Any risks arising from cash and cash
equivalents are further minimized by the use of a variety of local financial services
providers rather than a single banking institution.
Risks can arise from cash at the stores and in transporting these cash takings to
the financial institutions. Cash holdings (takings, change) in the stores are kept in
safes and kept to a minimum through regular or as-needed transfers of the cash
takings. The risk of theft by own or third-party personnel has been reduced further
by the installation of an effective internal control system. Cash holdings in the
safes are insured to an appropriate level against theft and acts of God, and are re-
placed if lost. When choosing firms to transport money and valuables, Charles
Vögele Group’s selection criteria are based on quality, transparency, security and
comprehensive insurance protection.
Receivables from tax refunds (value added tax) are secured by regularly verifying
that declarations are formally correct and by submitting the necessary declarations
on time. Prepayments to suppliers and other claims are checked regularly
and any identified credit risk is taken into account through a value adjustment
(see Note 2.13).
3.4 Liquidity risks
Subject to seasonal fluctuations in monthly revenues and the pre-financing of goods
purchasing, cash flow varies greatly across the financial year. A continuously up-
dated liquidity plan is in place to manage these liquidity risks. This plan is based on
the annual budgeted figures for sales, costs and investments. In order to meet
the necessary short-term liabilities, Charles Vögele Group keeps a permanent liq-
uidity reserve of about CHF 30 to 50 million.
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