LensCrafters 2015 Annual Report Download - page 113

Notes to the consolidated financial statement as of December 31, 2015 Page 19 di 68
3. FINANCIAL RISKS
The assets of the Group are exposed to different types of financial risk: market risk (which includes exchange rate risks, interest
rate risk relative to fair value variability and cash flow uncertainty), credit risk and liquidity risk. The risk management strategy
of the Group aims to stabilize the results of the Group by minimizing the potential effects due to volatility in financial markets.
The Group uses derivative financial instruments, principally interest rate and currency swap agreements, as part of its risk
management strategy.
Financial risk management is centralized within the Treasury department which identifies, evaluates and implements financial
risk hedging activities, in compliance with the Financial Risk Management Policy guidelines approved by the Board of
Directors, and in accordance with the Group operational units. The Policy defines the guidelines for any kind of risk, such as the
exchange rate risk, the interest rate risk, credit risk and the utilization of derivative and non-derivative instruments. The Policy
also specifies the management activities, the permitted instruments, the limits and proxies for responsibilities.
Exchange rate risk
The Group operates at the international level and is therefore exposed to exchange rate risk related to the various currencies
with which the Group operates. The Group only manages transaction risk. The transaction exchange rate risk derives from
commercial and financial transactions in currencies other than the functional currency of the Group, i.e., the Euro.
The primary exchange rate to which the Group is exposed is the Euro/USD exchange rate.
The exchange rate risk management policy defined by the Group’s management states that transaction exchange rate risk must
be hedged for a percentage between 50% and 100% by trading forward currency contracts or permitted option structures with
third parties.
This exchange rate risk management policy is applied to all subsidiaries, including companies which have been recently
acquired.
If the Euro/USD exchange rate increases by 10% as compared to the 2015 and 2014 actual average exchange rates and all other
variables remain constant, the impact on income before taxes would have been a decrease of Euro 99.4 million and
Euro 76.9 million in 2015 and 2014, respectively. If the Euro/USD exchange rate decreases by 10% as compared to the actual
2015 and 2014 average exchange rates and all other variables remain constant, the impact on income before taxes would have
been an increase of Euro 99.4 million and Euro 76.9 million in 2015 and 2014, respectively. Even if exchange rate derivative
contracts are stipulated to hedge future commercial transactions as well as assets and liabilities previously recorded in the
financial statements in foreign currency, these contracts, for accounting purposes, may not be accounted for as hedging
instruments.
Price risk
The Group is generally exposed to price risk associated with investments in bond securities which are classified as assets at fair
value through profit and loss. As of December 31, 2015 and 2014, the Group investment portfolio was fully divested. As a
result, there was no exposure to price risk on such dates.