Page 71 - 2board23full
P. 71
FINANCIAL STATEMENTS
3. Financial Risk Management
3.1 Financial Risk Factors
The Company is exposed to financial risk, such as market risk (fluctuations in exchange rates and interest rates and price
risk), credit risk and liquidity risk. The general risk management program of the Company focuses on the unpredictability
of the financial markets, and attempts to minimize their potential negative influence on the financial performance of
the Company.
The financial risk management of the Company is performed internally by a qualified Unit, which operates under specific
rules that have been approved by the Board of Directors.
a) Exchange Rate Risk
The main business associates of the Company, including customers, suppliers of goods, service providers and suppliers of
funds, are established in the European Union and therefore the largest part of the transactions are performed in €. Hence
the exchange rate risk of the Company is insignificant and relates only to some minor services and supplies provided for
by entities established outside the European Union.
b) Cash Flow and Fair Value Interest Rate Risk
The Company has significant interest-bearing assets in the form of cash and cash equivalent (short term time deposits and
other highly liquid investments), thus profits and cash flows from investment activities are dependent in market interest
rates. During 2009 the Company’s cash and cash equivalent (short term time deposits and other liquid investments)
earned an effective interest rate amounting to 2,65% (2008: 4,77%). The impact from possible future interest rates on
the Company’s financial performance is presented bellow:
2009 2008
Interest rates fluctuation
Impact on interest receipts +1% -1% +1% -1%
2.472.997 (2.472.997) 1.714.904 (1.714.904)
The Company is also exposed to interest rate risk arising from its long-term borrowings. Borrowings issued at variable
interest rates expose the Company to cash flow interest rate risk while borrowings issued at fixed interest rates expose
the Company to fair value interest rate risk.
The Company’s borrowings are borrowings with fixed interest rates. Hence the financial performance cannot be affected
by fluctuations in interest rates with respect to such loans. The fair value interest rate risk of such loans is presented in
note 4.22 “Bank loans and other borrowings”.
The Company is exposed to fair value interest rate risk as a result of discounting liabilities and receivables of long term
settlement. Such liabilities and receivables are discounted using the prevailing pre-tax Risk Free Rate which is affected by
interest rates fluctuations. The impact from possible future interest rates on the Company’s financial performance from
liabilities of long term settlement is presented bellow:
Financial Statements as at 31 December 2009 (Amounts in Euros unless otherwise stated) PAGE 34 OF 69
3. Financial Risk Management
3.1 Financial Risk Factors
The Company is exposed to financial risk, such as market risk (fluctuations in exchange rates and interest rates and price
risk), credit risk and liquidity risk. The general risk management program of the Company focuses on the unpredictability
of the financial markets, and attempts to minimize their potential negative influence on the financial performance of
the Company.
The financial risk management of the Company is performed internally by a qualified Unit, which operates under specific
rules that have been approved by the Board of Directors.
a) Exchange Rate Risk
The main business associates of the Company, including customers, suppliers of goods, service providers and suppliers of
funds, are established in the European Union and therefore the largest part of the transactions are performed in €. Hence
the exchange rate risk of the Company is insignificant and relates only to some minor services and supplies provided for
by entities established outside the European Union.
b) Cash Flow and Fair Value Interest Rate Risk
The Company has significant interest-bearing assets in the form of cash and cash equivalent (short term time deposits and
other highly liquid investments), thus profits and cash flows from investment activities are dependent in market interest
rates. During 2009 the Company’s cash and cash equivalent (short term time deposits and other liquid investments)
earned an effective interest rate amounting to 2,65% (2008: 4,77%). The impact from possible future interest rates on
the Company’s financial performance is presented bellow:
2009 2008
Interest rates fluctuation
Impact on interest receipts +1% -1% +1% -1%
2.472.997 (2.472.997) 1.714.904 (1.714.904)
The Company is also exposed to interest rate risk arising from its long-term borrowings. Borrowings issued at variable
interest rates expose the Company to cash flow interest rate risk while borrowings issued at fixed interest rates expose
the Company to fair value interest rate risk.
The Company’s borrowings are borrowings with fixed interest rates. Hence the financial performance cannot be affected
by fluctuations in interest rates with respect to such loans. The fair value interest rate risk of such loans is presented in
note 4.22 “Bank loans and other borrowings”.
The Company is exposed to fair value interest rate risk as a result of discounting liabilities and receivables of long term
settlement. Such liabilities and receivables are discounted using the prevailing pre-tax Risk Free Rate which is affected by
interest rates fluctuations. The impact from possible future interest rates on the Company’s financial performance from
liabilities of long term settlement is presented bellow:
Financial Statements as at 31 December 2009 (Amounts in Euros unless otherwise stated) PAGE 34 OF 69
