LensCrafters 2015 Annual Report Download - page 187

Notes to the separate financial statements as of December 31, 2015 Page 7 of 77
2. RISK MANAGEMENT
Policies associated with the various hedging activities
The principal classes of risk to which the Company is exposed are interest rate risk and exchange rate risk.
Management constantly and continuously monitors financial risks to identify those assets and liabilities that might
generate currency or interest rate risks, and hedges such risks according to the different market conditions and in
compliance with the Financial Risk Policy revised by the Board of Directors on February 28, 2013.
Credit risk
Credit risk exists in relation to accounts receivable from customers outside the Group, cash and cash equivalents,
financial instruments and deposits held with banks and other financial institutions.
With reference to credit risk relating to management of financial resources and cash, this is managed and monitored by
the Treasury department, which adopts procedures to ensure that the Company operates with prime credit institutions.
Credit limits for the principal financial counterparties are based on assessments and analyses conducted by the Treasury
department.
Within the Group there are agreed guidelines governing relations with bank counterparties, and all Group companies
comply with the directives of the “Financial Risk Policy”.
In general, bank counterparties are selected by the Treasury department and available cash may be deposited, over a
certain limit, only with investment grade counterparties, as defined in the Policy.
Operations in derivatives have been completed centralized with the Company as from October 1, 2015. This activity
continues to be carried out with investment grade counterparties with solid and proven experience of negotiating and
executing derivatives, as defined in the Treasury Policy. This event has led to a significant increase in the Company's
use of derivative financial instruments.
The same date also saw the centralization of the cash pooling systems used to manage the Group's cash flows, thanks to
which dispersion of liquidity is avoided and borrowing costs minimized.
No circumstances arose during the year in which credit limits were exceeded. As far as the Company is aware, there are
no contingent losses arising from the inability of the above counterparties to meet their contractual obligations.
Liquidity risk
With reference to the policies and decisions adopted for addressing liquidity risks, the Company takes suitable actions
to be able to duly meet its obligations.
In particular, the Company:
• uses debt instruments or other credit lines to meet its liquidity requirements;
• uses different sources of financing and had Euro 79.7 million in available credit lines as of December 31, 2015;
• is not subject to significant concentrations of liquidity risk, either in terms of financial assets or sources of
financing;