Page 80 - Annual_Report_2016
P. 80
Financial Statements aia.gr
3. Financial risk management
3.1 Financial risk factors
The Company is exposed to financial risk, such as market risk (fluctuations in exchange rates, 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.
The ongoing developments relating to the macroeconomic and financial environment in Greece have not
significantly affected the operations and financial performance of the Company.
Historically, the Company has demonstrated increased resilience in the years of macroeconomic instability,
combining financial performance with operational excellence and quality of services and therefore
Management does not expect that the operations and financial position of the Company will be significantly
affected in the foreseeable future. Despite all adversities, past and future, Management has and will continue
to assess the situation and its possible impact, adjusting its operating strategy whenever necessary, in order
to deliver financial and non-financial value to shareholders and other stakeholder parties.
3.1.1 Exchange rate risk
Exchange rate risk occurs if future business transactions, recognized assets and liabilities and net
investments in activities outside the euro zone are expressed in a currency other than the functional
currency of the Company (euro).
The Company’s exposure to foreign exchange risk is very limited since its business is substantially
transacted in its functional currency.
3.1.2 Cash flow and fair value interest rate risk
The cash flow interest rate risk is the risk of fluctuations in the future cash flows of a financial instrument as
a result of fluctuations in the market interest rate.
The Company has 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
on market interest rates. During 2016 the Company’s cash and cash equivalent (short term time deposits
and other liquid investments) earned an effective interest rate (referring to yield from time deposits and
current accounts) amounting to 0.00% (2015: 0.03%). The impact from possible future interest rates on the
Company’s financial performance, regarding cash and cash equivalents, is presented below:
Interest rates fluctuation +1.00% 2016 +1.00% 2015
Impact on interest receipts 2,877,672 1,229,511
0.00% -0.03%
0 (34,917)
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 5.20 “Bank loans”.
The fair value interest rate risk is the risk of fluctuations in the value of a financial instrument as a result
of fluctuations in the market interest rate. The Company is exposed to fair value interest rate risk as a
Financial Statements as at 31 December 2016 (Amounts in Euros unless otherwise stated)
33 of 57
3. Financial risk management
3.1 Financial risk factors
The Company is exposed to financial risk, such as market risk (fluctuations in exchange rates, 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.
The ongoing developments relating to the macroeconomic and financial environment in Greece have not
significantly affected the operations and financial performance of the Company.
Historically, the Company has demonstrated increased resilience in the years of macroeconomic instability,
combining financial performance with operational excellence and quality of services and therefore
Management does not expect that the operations and financial position of the Company will be significantly
affected in the foreseeable future. Despite all adversities, past and future, Management has and will continue
to assess the situation and its possible impact, adjusting its operating strategy whenever necessary, in order
to deliver financial and non-financial value to shareholders and other stakeholder parties.
3.1.1 Exchange rate risk
Exchange rate risk occurs if future business transactions, recognized assets and liabilities and net
investments in activities outside the euro zone are expressed in a currency other than the functional
currency of the Company (euro).
The Company’s exposure to foreign exchange risk is very limited since its business is substantially
transacted in its functional currency.
3.1.2 Cash flow and fair value interest rate risk
The cash flow interest rate risk is the risk of fluctuations in the future cash flows of a financial instrument as
a result of fluctuations in the market interest rate.
The Company has 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
on market interest rates. During 2016 the Company’s cash and cash equivalent (short term time deposits
and other liquid investments) earned an effective interest rate (referring to yield from time deposits and
current accounts) amounting to 0.00% (2015: 0.03%). The impact from possible future interest rates on the
Company’s financial performance, regarding cash and cash equivalents, is presented below:
Interest rates fluctuation +1.00% 2016 +1.00% 2015
Impact on interest receipts 2,877,672 1,229,511
0.00% -0.03%
0 (34,917)
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 5.20 “Bank loans”.
The fair value interest rate risk is the risk of fluctuations in the value of a financial instrument as a result
of fluctuations in the market interest rate. The Company is exposed to fair value interest rate risk as a
Financial Statements as at 31 December 2016 (Amounts in Euros unless otherwise stated)
33 of 57
