Annual Report

Astarta Holding N.V.Consolidated financial statements as at and for the year ended 31 December 201132 FINANCIAL RISK MANAGEMENT(a)(b)(c)OverviewThe Group has exposure to the following risks from its use of financial instruments:credit riskliquidity riskmarket risk.This note presents information about exposure to each of these risks and the Group’s objectives,policies and processes for measuring and managing risk. Further quantitative disclosures are includedthroughout these consolidated financial statements.The Board of Directors has overall responsibility for the establishment and oversight of the riskmanagement framework.The risk management policies are established to identify and analyze the risks faced by the Group, toset appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk managementpolicies and systems are reviewed regularly to reflect changes in market conditions and the Group’sactivities. The Group, through its training and management standards and procedures, aims to developa disciplined and constructive control environment in which all employees understand their roles andobligations.The Audit Committee oversees how management monitors compliance with risk management policiesand procedures and reviews the adequacy of the risk management framework in relation to the risks.Credit riskCredit risk is the risk that a counterparty will not meet its obligations under a financial instrument orcustomer contract, leading to a financial loss. The Group is exposed to credit risk from its operatingactivities (primarily for trade receivables) and from its financing activities, including deposits with banksand financial institutions, foreign exchange transactions and other financial instruments.Trade accounts receivableThe exposure to credit risk is influenced mainly by the individual characteristics of each customer. Thedemographics of the Group’s customer base, including the default risk of the industry and country, inwhich customers operate, has less of an influence on credit risk.Management established a credit policy under which each new customer is analyzed individually forcreditworthiness before standard payment and delivery terms and conditions are offered. The reviewincludes external ratings, where available, and in some cases bank references.Majority of customers have been transacting with the Group for over three years, and no losses areexpected from non-performance by these counterparties. In monitoring customer credit risk, customersare grouped according to their credit characteristics, including whether they are an individual or legalentity, whether they are a wholesale, retail or end-user customer, geographic location, industry, agingprofile, maturity and existence of previous financial difficulties. Trade and other receivables relatemainly to wholesale customers. Customers that are graded as “high risk” are placed on a restrictedcustomer list, and future sales are made on a prepayment basis with approval of management. TheGroup does not require collateral in respect of trade and other receivables. The Group establishes anallowance that represents its estimate of incurred losses in respect of trade and other receivables andinvestments. The main components of this allowance are a specific loss component that relates toindividually significant exposures, and a collective loss component established for groups of similarassets in respect of losses that have been incurred but not yet identified. The collective loss onallowances is determined based on historical data of payment statistics for similar financial assets.GuaranteesThe Group’s policy is to provide financial guarantees only to wholly-owned subsidiaries. At 31 December2011 and 2010 no guarantees are outstanding. For loan security refer to Note 16.134