Nokia 2007 Annual Report Download - page 212

35. Risk Management (Continued)
Equity price risk
The VaR for the Group equity investment in publicly traded companies is presented in Table 3 below.
Table 3 Equity investment ValueatRisk
2007 2006
EURm EURm
At December 31 ...................................................... 0.8 0.3
Average for the year ................................................... 0.5 0.3
Range for the year .................................................... 0.20.8 0.20.5
(b) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Group. Credit risk arises from bank and cash, fixed income and moneymarket
investments, derivative financial instruments, loans receivable as well as credit exposures to
customers, including outstanding receivables, financial guarantees and committed transactions. Credit
risk is managed separately for business related and financialcredit exposures.
Except as detailed in the following table, the maximum exposure to credit risk is limited to the book
value of the financial assets as included in Group’s balance sheet:
2007 2006
EURm EURm
Financial guarantees given on behalf of customers or suppliers .................... 130 23
Loan commitments given but not used ....................................... 270 164
400 187
Business Related Credit Risk
The Company aims to ensure highest possible quality in accounts receivable and loans due from
customers and suppliers. The Group Credit Policy, approved by Group Executive Board, lays out the
framework for the management of the business related credit risks in all Nokia group companies and
affiliates.
Credit exposure is measured as the total of accounts receivable and loans outstanding due from
customers and other third parties and committed credits.
Group Credit Policy provides that credit decisions are based on credit rating. Group Rating Policy
defines the rating principles. Ratings are approved by Nokia Group Rating Committee. Credit risks are
approved and monitored according to the credit policy of each business entity. These policies are
based on the Group Credit Policy. Concentrations of customer or country risks are monitored at the
Nokia Group level. When appropriate, assumed credit risks are mitigated with the use of approved
instruments, such as collateral or insurance and sale of selected receivables. Bad debt provisions are
made if recovery of a credit becomes uncertain.
The Group has provided impairment allowances as needed including on accounts receivable and loans
due from customers and other third parties not past due, based on the analysis of debtors’ credit
quality and credit history. The Group establishes an allowance for impairment that represents an
estimate of incurred losses. All receivables and loans due from customers and other third parties are
considered on an individual basis for impairment testing.
Three customers account for approximately 4.9%, 2.9% and 2.5% (2006: 4.2%, 4.0%, 3.2%) of Group
accounts receivables and loans due from customers and other third parties as at December 31, 2007
F69
Notes to the Consolidated Financial Statements (Continued)