Entire Document - Chris Hani District Municipality

47.5 Significant Accounting PoliciesIt is the policy of the municipality to disclose information that enables the user of itsAnnual Financial Statements to evaluate the nature and extent of risks arising fromFinancial Instruments to which the municipality is exposed on the reporting date.The municipality has exposure to the following risks from its operations in FinancialInstruments:- Credit Risk;- Liquidity Risk; and- Market Risk.Risks and exposures are disclosed as follows:Chapter 4Market RiskMarket Risk is the risk that changes in market prices, such as foreign exchange rates,interest rates and equity prices will affect the municipality’s income or the value ofits holdings in Financial Instruments. The objective of market risk management isto manage and control market risk exposures within acceptable parameters, whileoptimising the return.Credit RiskCredit Risk is the risk of financial loss to the municipality if a customer or counterpartyto a Financial Instrument fails to meet its contractual obligations and arises principallyfrom the municipality’s receivables from customers and investment securities.Liquidity RiskLiquidity Risk is the risk that the municipality will encounter difficulty in meeting theobligations associated with its Financial Liabilities that are settled by delivering cashor another financial asset. The municipality’s approach to managing liquidity is toensure, as far as possible, that it will always have sufficient liquidity to meet itsliabilities when due, under both normal and stressed conditions, without incurringunacceptable losses or risking damage to the municipality’s reputation.Liquidity Risk is managed by ensuring that all assets are reinvested at maturityat competitive interest rates in relation to cash flow requirements. Liabilities aremanaged by ensuring that all contractual payments are met on a timeous basisand, if required, additional new arrangements are established at competitive rates toensure that cash flow requirements are met.A maturity analysis for Financial Liabilities (where applicable) that shows theremaining undiscounted contractual maturities is disclosed in Notes 47.8 and 47.9 tothe Annual Financial Statements.197