Telstra 2007 Annual Report Download - page 253

Telstra Corporation Limited and controlled entities
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Notes to the Financial Statements (continued)
(b) Risks and mitigation (continued)
Credit risk (continued)
One of the methods that we use to manage the risk relating to these
instruments is to monitor our exposure by country of financial
instit ution. When reviewing concentrations of risk, we adjust for the
period to maturity of relevant instruments in our portfolio to
accurately consider our exposure at a point in time. On this basis, our
credit risk exposure on money market instruments, forward foreign
currency contracts, cross currency and interest rate swaps
out standing at balance date (which includes a time based volatility
allowance (VAR)) by country of financial institution is included in
Table L and Table M below.
Our maximum exposure to credit risk is based on the recorded
amounts of our financial assets, net of any applicable provisions for
loss, as shown in Table A and Table B. Where entities have a right of
set-off and intend to settle on a net basis under master netting
arrangements, this set-off has been recognised in the financial
statements on a net basis. We may also be subject to credit risk for
transactions which are not included in the balance sheet, such as
when we provide a guarantee for another party. Details of our
cont ingent liabilit ies are disclosed in note 27.
Liquidity risk
Liquidity risk includes the risk that, as a result of our operational
liquidity requirements:
• we will not have sufficient funds to settle a transaction on the due
date;
• we will be forced to sell financial assets at a value which is less than
what they are worth; or
• we may be unable to settle or recover a financial asset at all.
To help reduce these risks we:
• have a liquidity policy which targets a minimum and average level
of cash and cash equivalents to be maintained;
• have readily accessible standby facilit ies and other funding
arrangements in place;
• generally use instruments that are tradeable in highly liquid
markets; and
• have a liquidity portfolio structure that requires surplus funds to be
invested within various bands of liquid instruments ranging from
ultra liquid, highly liquid and liquid instruments.
34. Financial and capital risk management (continued)
Ta ble L Tel st ra Group
Credit risk concentrations (VAR based)
As at 30 June 2007 As at 30 June 2006
% $m %$m
Australia . . . . . . . . . . . 36.1 2,239 35.5 2,086
United States. . . . . . . . 23.1 1,432 31.9 1,876
Japan . . . . . . . . . . . . 2.6 160 3.8 223
Europe . . . . . . . . . . . . 19.9 1,231 13.7 807
United Kingdom . . . . . . 7.9 487 4.3 254
Canada. . . . . . . . . . . . 1.7 106 2.3 133
Switzerland . . . . . . . . . 5.3 328 6.9 409
Hong Kong . . . . . . . . . 2.9 181 1.1 67
New Zealand . . . . . . . . 0.5 30 0.5 28
100.0 6,194 100.0 5,883
Ta ble M Telstra Entity
Credit risk concentrations (VAR based)
As at 30 June 2007 As at 30 June 2006
% $m %$m
Australia . . . . . . . . . . . 36.9 2,181 35.5 2,017
United States. . . . . . . . 24.1 1,421 32.7 1,860
Japan . . . . . . . . . . . . 2.7 159 3.9 223
Europe . . . . . . . . . . . . 20.9 1,231 14.2 807
United Kingdom . . . . . . 8.0 470 4.0 229
Canada. . . . . . . . . . . . 1.8 106 2.3 133
Switzerland . . . . . . . . . 5.6 328 7.2 409
New Zealand . . . . . . . . - - 0.2 9
100.0 5,896 100.0 5,687