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42 Huawei Investment & Holding Co., Ltd. 2014 Annual Report
b) Sensitivity Analysis
As of December 31, 2014, assume that the interest rate fluctuates by 50 basis points and other variables are
unchanged, the Group's net profit and owner's equity will increase or decrease by CNY66 million (in 2013, the
amount was CNY81 million).
For the financial instruments that are held on the balance sheet date and expose the Group to fair value change risks
due to interest rate fluctuations, the impacts on net profit and owner's equity in the preceding sensitivity analysis
are a re-measurement of the financial instruments based on the new interest rate, assuming that the interest rate
changes on the balance sheet date. For the floating-rate and non-derivative financial instruments that are held
on the balance sheet date and expose the Group to cash flow change risks due to interest rate fluctuations, the
impacts on net profit and owner's equity in the preceding sensitivity analysis are impacts on interest expense or
income estimated on an annual basis due to interest rate fluctuations. The analysis of the previous year is based
on the same assumptions and methods.
Credit Risk
The company has established and implemented globally consistent credit management policies and practices,
processes, IT systems, and credit risk assessment tools. It has established dedicated credit management organizations
across all regions and business units, and set up centers of expertise specializing in credit management in Europe
and Asia Pacific. The company uses risk assessment models to determine customer credit ratings and credit limits.
It has also implemented risk control points over key processes throughout the end-to-end sales cycle to manage
credit risks in a closed loop. Huawei's Credit Mgmt Dept regularly assesses global credit risk exposures and develops
IT tools to help field offices monitor risk status, estimate potential losses, and determine bad debt provisions as
appropriate. To minimize risks, a special process is followed if a customer misses a payment or poses an unacceptably
high credit risk.
Sales Financing
With global coverage, Huawei's sales financing team maintains close contact with customers to understand their
financing needs and tap into various financing resources around the world. As a bridge for communication and
cooperation between financial institutions and customers, the sales financing team provides customers with
professional financing solutions that contribute to ongoing customer success. Third-party financial institutions work
with Huawei in export credit, leasing, and factoring activities to share the benefits and bear linked risks. Huawei has
established systematic financing policies and project approval processes to strictly control financing risk exposures.
Huawei shares risks with financial institutions on certain projects only, and makes provisions for risk contingencies
to control business risks.