Nissan 2008 Annual Report Download - page 65

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63
Nissan Annual Report 2008
Prior fiscal year Current fiscal year
From April 1, 2006 From April 1, 2007
[
To March 31, 2007
][
To March 31, 2008
]
(3) Description of risks relating to derivative transactions
1) Market risk
Although derivative transactions are used for the
purpose of hedging risks on assets and liabilities
recorded in the consolidated balance sheet, there remain
the risk of foreign currency exchange fluctuations on
currency transactions, the risk of interest rate
fluctuations on interest rate transactions and the risk of
market price fluctuations on commodity transactions.
2) Credit risk
The Group is exposed to the risk that a counterparty to
its financial transactions could default and jeopardize
future profits. We believe that this risk is insignificant as
the Group enters into derivative transactions only with
financial institutions which have a sound credit profile.
The Group enters into these transactions also with
Renault Finance S.A. (“RF”), a specialized financial
subsidiary of the Renault Group which, the Company
believes, is not subject to any such material risk. This is
because RF enters into derivative transactions to cover
such derivative transactions with the Group only with
financial institutions of the highest caliber carefully
selected by RF based on its own rating system.
3) Legal risk
The Group is exposed to the risk of entering into a
financial agreement which may contain inappropriate
terms and conditions as well as the risk that an existing
contract may be affected by revisions to the relevant
laws and regulations. The Group’s Legal Department and
Finance Department make every effort to minimize legal
risk by reviewing any new agreements of significance
and by reviewing the related documents which are
retained on file in a central location.
(3) Description of risks relating to derivative transactions
1) Market risk
Same as the prior fiscal year.
2) Credit risk
Same as the prior fiscal year.
3) Legal risk
Same as the prior fiscal year.
(For derivative transactions)