Huawei 2014 Annual Report Download - page 42

Download and view the complete annual report

Please find page 42 of the 2014 Huawei annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

40 Huawei Investment & Holding Co., Ltd. 2014 Annual Report
Financial Risk Management
In 2014, Huawei amended and improved its financial risk management policies and processes to further enhance
the company's capability to withstand financial risks and better support its business development.
Liquidity Risk
Huawei has continuously refined its system for cash flow planning, budgeting, and forecasting to better assess its
short-term and medium-to-long-term liquidity needs. The company has implemented a variety of prudent financial
measures to fulfill its overall liquidity needs, including centralizing cash management, maintaining a reasonable
level of funds, and gaining access to adequate and committed credit facilities. As of December 31, 2014, cash
and short-term investments increased by 29.4% year-on-year to CNY106,036 million. An adequate capital reserve
and a stable cash flow from operating activities enabled Huawei to manage its liquidity and borrowing risks, thus
ensuring financial stability for the company.
CNY Million 2014 2013 YOY
Cash flow from operating activities 41,755 22,554 85.1%
Cash and short-term investments 106,036 81,944 29.4%
Short-term and long-term borrowings 28,108 23,033 22.0%
Foreign Exchange Risk
The Group's functional currency is CNY. Huawei has foreign currency exposures related to buying, selling, and
financing in currencies other than CNY, mainly USD and EUR. According to the Group's foreign exchange policy,
material foreign exchange exposures are hedged unless hedging is uneconomical due to market liquidity and/
or hedging costs. The Group has developed a full set of foreign exchange management policies, processes, and
instructions. These include:
■ Natural hedging: The Group structures its operations to match receivables and payables in a foreign currency,
to the extent possible.
■ Financial hedging: For certain currencies where natural hedging does not fully offset the foreign currency
position, the Group hedges using a combination of short and long-term foreign currency loans.
In countries where local currencies depreciated sharply or those with strict foreign exchange controls, the Group
managed foreign exchange exposures by, for example, pricing in USD, accelerating payment collection, and promptly
transferring payments collected out of these countries.