Quarterly Financial Report Q1 2012 - Export Development ... - EDC

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)Market RiskMarket risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate becauseof changes in market prices. Market risk comprises three types of risk: foreign exchange risk, interest raterisk and other price risk. We are exposed to potential negative impacts on the value of financial instrumentsresulting from adverse movements in interest and foreign exchange rates. We have policies and procedures inplace to ensure that interest rate and foreign exchange risks are identified, measured, managed and regularlyreported to management and the Board of Directors.Liquidity RiskLiquidity risk is the risk that we would be unable to honour daily cash commitments or the risk that we wouldhave to obtain funds rapidly, possibly at an excessively high premium during severe market conditions. Wemaintain liquidity through a variety of methods such as holding cash and marketable securities and havingaccess to commercial paper markets.Our objectives, policies and processes for managing financial instruments risk as well as the method we useto measure exposure to risk are disclosed within our 2011 annual report in the notes related to our derivativefinancial instruments and debt instruments, as well as in the text and tables displayed in green font inmanagement’s discussion and analysis on pages 67 to 72.18. Related Party TransactionsThe Government of Canada is the sole shareholder of Export Development Canada. We enter intotransactions with other government departments, agencies and Crown corporations in the normal course ofbusiness, under terms and conditions similar to those that apply to unrelated parties.24 EXPORT DEVELOPMENT CANADA