AS AT 30 JUNE 2011
90
38. Financial risk management (continued)
Interest rate risk
Foreign exchange risk
Carrying
–1%
+1%
–10%
+10%
amount Proft/Equity Proft/Equity Proft/Equity Proft/Equity
Consolidated entity at 30 June 2010
$’000
$’000
$’000
$’000
$’000
Financial assets
Cash and cash equivalents
74,844
(524)
524
45
(36)
Loans and receivables
– Fixed interest rate
595,185
–
–
3,917
(3,205)
Loss reserve
49,687
(348)
348
229
(188)
Financial liabilities
Payables
40,944
–
–
(106)
87
Borrowings
– Fixed interest rate
469,643
–
–
(2,493)
2,040
– Floating interest rate
122,878
860
(860)
–
–
Total increase/(decrease)
(12)
12
1,592
(1,302)
The Parent entity for 2011 and 2010 had no exposures to interest rate risk and foreign exchange risk.
Credit risk
Credit risk is the risk that a contracting party will not complete its obligations under a fnancial instrument and, as a result,
cause the Group to incur a fnancial loss. The Group has exposure to credit risk on all fnancial assets included in its balance
sheet. The Group’s maximum exposure to credit risk on its fnancial assets is its carrying amount.
To manage retail credit risk, the Group has developed a comprehensive credit assessment process. Loans and receivables
consist mainly of lease and loan contracts provided to consumer and commercial customers. Credit underwriting typically
includes the use of either an application score-card and credit bureau report or a detailed internal risk profle review for
each application, including a review of the customer against a comprehensive credit database. Internal credit review and
verifcation processes are also used depending on the applicant.
At origination, a credit assessment system along with information from two national credit bureaux determines the
creditworthiness of applications based on the statistical interpretation of a range of application information (this is
replaced by the detailed risk profle review for Certegy). These credit risk assessments are supported by reviews of certain
applications by dedicated credit staf who apply the Group’s credit and underwriting policy within specifc approval
authorities. Portfolio performance and credit risk of new applications is monitored monthly by the Pricing, Risk and Credit
Committee. The Group has a specialist collection function which manages all delinquent accounts.
A primary measure of delinquency used by the Company is the proportion of contracts with an outstanding payment that
is 30, 60 or 90+ days past due. For the purposes of measurement of past due amounts, an account is considered delinquent
if it is overdue on a contractual payment by one day. The total principal owing on the contract is defned as the past due
amount.
Notes to the Financial Statements (continued)