Wintec Annual Report 2009
Wintec Annual Report 2009
Wintec Annual Report 2009
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FINANCIAL PERFORMANCE<br />
NOTES TO THE FINANCIAL STATEMENTS (CONT)<br />
FOR THE YEAR ENDED 31 DECEMBER <strong>2009</strong><br />
17bFINANCIAL INSTRUMENTS RISK<br />
The Institute and group has a series of policies to manage the risks associated with financial<br />
instruments. It is risk averse and seeks to minimise exposure from its treasury activities.<br />
These policies do not allow any transactions that are speculative in nature to be entered into.<br />
Market risk<br />
Price risk<br />
Price risk is the risk that the fair value or future cash flows of a financial instrument will<br />
fluctuate as a result of changes in market prices. The Institute and group do not hold any<br />
financial instruments which are exposed to price risk.<br />
Currency risk<br />
Currency risk is the risk that the fair value or future cash flows of a financial instrument<br />
will fluctuate due to changes in foreign exchange rates. The institute is not exposed to any<br />
significant currency risk.<br />
Fair value interest rate risk<br />
Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate<br />
due to changes in market interest rates. Borrowings and investments issued at fixed rates<br />
of interest create exposure to fair value interest rate risk. The Institute and group does not<br />
actively manage its exposure to fair value interest rate risk.<br />
Cash flow interest rate risk<br />
Cash flow interest rate risk is the risk that the cash flows from a financial instrument will<br />
fluctuate because of changes in market interest rates. Borrowings and investments issued<br />
at variable interest rates create exposure to cash flow interest rate risk. The institute does<br />
not generally enter in to borrowing or investments with variable interest rates.<br />
Credit risk<br />
Credit risk is the risk that a third party will default on its obligation to the Institute and group,<br />
causing it to incur a loss. Due to the timing of its cash inflows and outflows, surplus cash is<br />
invested into term deposits which give rise to credit risk.<br />
The Institute and group limits the amount of credit exposure to any one financial institution for<br />
term deposits to no more than 40% of total investments held. The group invests funds only<br />
with registered banks that have a Standard and Poor’s credit rating of at least A2 for short<br />
term and A – for long-term investments.<br />
<strong>Wintec</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2009</strong> _ 67
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