ZaraAnnual-English2008

26.
RISK MANAGEMENT
Interest rate risk
The Group is exposed to interest rate risk on its interest bearing assets and liabilities (bank deposits,
overdrafts, and loans).
The following table demonstrates the sensitivity of the income statement to reasonably possible
changes in interest rates as of December, with all other variables held constant.
The sensitivity of the income statement is the effect of the assumed changes in interest rates on
the Group’s profit for one year, based on financial assets and liabilities held at December bearing
floating interest rates.
2008 Increase in basis points Effect on Profit for the year
JD
JD 75 (234,204)
USD 75 (191,079)
Decrease in basis points
JD 50 156,135
USD 50 127,386
Effect on Profit for the year
JD
Equity price risk
The following table demonstrates the sensitivity of the income statement and the cumulative
change in fair value to reasonably possible changes in equity prices, with all other variables held
constant.
2008 2007
Change in
equity price
Effect on
profit of the
year
Effect on
equity
Change in
equity price
Effect on
profit of the
year
Effect on
Equity
% JD JD % JD JD
Amman Stock Exchange 10 - 2,171,813 10 7,250 1,942,404
The effect of decreases in equity prices is expected to be equal and opposite to the effect of the
increases shown.
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation
and cause the other party to incur a financial loss. The Group is exposed to credit risk on its bank
balances, receivables and certain other assets as reflected in the balance sheet.
The Group seeks to limit its credit risk with respect to banks by only dealing with reputable banks
and with respect to customers by setting credit limits for individual customers and monitoring
outstanding receivables.
The Group provides services to large number of customers. No single customer accounts for more
than 10% of outstanding accounts receivable at 31 December 2008.
2007 Increase in basis points Effect on Profit for the year
JD
JD 75 (218,907)
USD 75 (35,833)
Decrease in basis points
JD 50 145,938
USD 50 23,889
Effect on Profit for the year
JD
72 Consolidated Financial Statement Annual Report 2008 73