Page 57 - NZPM Annual Report 2017

20. FINANCIAL RISK MANAGEMENT

The Group is subject to a number of financial risks which arise as a result of its activities, including importing
and domestic trading.

Treasury activities are managed at the business unit level and governed by a Group treasury policy. The use
of derivative financial instruments is governed by Group policy approved by the board. The Group does not
engage in speculative transactions.

Details of significant accounting policies and the methods adopted, including the criteria for recognition and
the basis of measurement, are disclosed in note 1.

(a) Market risk
(i) Foreign currency risk
The Group operates internationally and has exposure to foreign currency risk as a result of transactions
denominated in foreign currencies from normal trading activities. Major trading currencies include the
Australian dollar, United States dollar, and Euro. The Group uses foreign exchange contracts, spot purchases of
foreign currency and foreign bank accounts to manage these exposures.

At year end, the Group had foreign exchange exposures relating to cash and creditors.

At balance date the Group had the following forward exchange contracts (notional amounts):

2017 2016
$’000 $’000
United States Dollar (USD) 1,051 1,062
European Community Euro (EUR) 1,044 834
Australian Dollar (AUD) 1,147 712
3,242 2,608

(ii) Interest risk
The Group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates.
Interest rate risk is identified by forecasting cash flow requirements, short-term through to long-term.
The Group has floating rate borrowings used to fund on-going activities, which are repriced at the roll-
over dates.

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