BT 2015 Annual Report Download - page 189

187
Overview
The Strategic Report
Purpose and strategy Delivering our strategy Group performance Governance Financial statements
Additional information
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he roup issues or holds financial instruents ainl to finance its operations to finance corporate transactions such as dividends share bubacs
and acquisitions; for the temporary investment of short-term funds; and to manage the currency and interest rate risks arising from its operations
and fro its sources of finance. n addition various financial instruents for eaple trade receivables and trade paables arise directl fro
the group’s operations.
Financial risk management
he roups activities epose it to a variet of financial riss aret ris includin interest rate ris and forein echane ris credit ris and
liuiditris.
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The group has a centralised treasury operation whose primary role is to manage liquidity and funding requirements as well as the group’s exposure
to associated financial and aret riss includin credit ris interest rate ris and forein echane ris.
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Treasury policy is set by the Board. Group treasury activities are subject to a set of controls appropriate for the magnitude of borrowing, investments
and group-wide exposures. The Board has delegated authority to operate these policies to a series of panels responsible for the management of key
treasury risks and operations. Appointment to and removal from the key panels requires approval from two of the following: the Chairman, the Chief
Executive or the Group Finance Director.
here has been no chane in the nature of the roups ris profile between 1 arch 01 and the date of approval of these financial stateents.
Interest rate risk management
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nterest rate ris arises priaril fro the roups lon-ter borrowins. nterest cash ow ris arises fro borrowins issued at variable rate partiall
oset b cash held at variable rates. air value interest rate ris arises fro borrowins issued at fied rates.
he roups polic as set b the oard is to ensure that at least 0 of net debt is at fied rates. hort-ter interest rate anaeent is deleated
to the treasury operation while long-term interest rate management decisions require further approval by the Group Finance Director, Director of
Treasury, Tax and Risk Management or the BT Group Treasurer who each have been delegated such authority from the Board.
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n order to anae the roups interest rate profile the roup has entered into cross-currenc and interest rate swap areeents with coercial
bans and other institutions to var the aounts and periods for which interest rates on borrowins are fied. he duration of the swap areeents
atches the duration of the debt instruents. he aorit of the roups lon-ter borrowins have been and are subect to fied terlin interest
rates after applying the impact of these hedging instruments.
Foreign exchange risk management
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he purpose of the roups forein currenc hedin activities is to protect the roup fro the ris that eventual future net inows and net outows
will be adversel aected b chanes in echane rates.
he oards polic for forein echane ris anaeent defines the tpe of transactions which should norall be covered includin sinificant
operational fundin and currenc interest eposures and the period over which cover should etend for the dierent tpes of transactions.
Short-term foreign exchange management is delegated to the treasury operation whilst long-term foreign exchange management decisions require
further approval from the Group Finance Director, Director of Treasury, Tax and Risk Management or the BT Group Treasurer who have been delegated
such authority by the Board.
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 sinificant proportion of the roups eternal revenue and costs arise within the UK and are denoinated in terlin. he roups non-UK operations
generally trade and are funded in their functional currency which limits their exposure to foreign exchange volatility. Foreign currency borrowings
used to finance the roups operations have been predoinantl swapped into terlin usin cross-currenc swaps.
The group also enters into forward currency contracts to hedge foreign currency, capital purchases, purchase and sale commitments, interest expense
and forein currenc investents. he coitents heded are principall denoinated in U ollar uro and sia acific reion currencies. s a
result the roups eposure to forein currenc arises ainl on its non-UK subsidiar investents and on residual currenc tradin ows.
he table below reects the currenc and interest rate profile of our loans and borrowins after the ipact of hedin.
2015 2014
At 31 March
Fixed rate
interest
£m
Floating
rate
interest
£m
Total
£m
Fixed rate
interest
£m
Floating
rate
interest
£m
Total
£m
Sterling 7,601 991 8,592 7,946 1,265 9,211
Euro – 482 482 – 285 285
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atio of fied to oatin 84% 16% 100% 84% 16% 100%
eihted averae eective fied interest rate  terlin 6.3% 6.6%