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32. Financial risk management and financial instruments
Overview
Heineken has exposure to the following risks from its use of financial instruments, as they arise in the normal course of
Heineken's business:
Credit risk
Liquidity risk
Market risk.
This note presents information about Heineken's exposure to each of the above risks, and it summarises Heineken's policies and
processes that are in place for measuring and managing risk, including those related to capital management. Further quantitative
disclosures are included throughout these consolidated financial statements.
Risk management framework
The Executive Board, under the supervision of the Supervisory Board, has overall responsibility and sets rules for Heineken's risk
management and control systems. They are reviewed regularly to reflect changes in market conditions and the Group's activities.
The Executive Board oversees the adequacy and functioning of the entire system of risk management and internal control, assisted
by Group departments.
The Global Treasury function focuses primarily on the management of financial risk and financial resources. Some of the risk
management strategies include the use of derivatives, primarily in the form of spot and forward exchange contracts and interest
ate swaps, but options can be used as well. It is the Group policy that no speculative transactions are entered into.
redit risk
redit risk is the risk of financial loss to Heineken if a customer or counterparty to a financial instrument fails to meet its contractual
bligations, and arises principally from Heineken's receivables from customers and investment securities.
he economic crisis has impacted our regular business activities and performance, in particular in consumer spending and solvency,
owever, the business impact differed across the regions and operations. Local management has assessed the risk exposure
allowing Group instructions and is taking action to mitigate the higher than usual risks. Intensified and continuous focus is being
iven in the areas of customers (managing trade receivables and loans) and suppliers (financial position of critical suppliers).
■s at the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is
spresented by the carrying amount of each financial instrument, including derivative financial instruments, in the consolidated
eatement of financial position.
oans to customers
ieineken's exposure to credit risk is mainly influenced by the individual characteristics of each customer,
eineken's held-to-maturity investments includes loans to customers, issued based on a loan contract,
oans to customers are ideally secured by, amongst others, rights on property or intangible assets, such as the right to take
ossession of the premises of the customer. Interest rates calculated by Heineken are at least based on the risk-free rate plus
margin, which takes into account the risk profile of the customer and value of security given.
eineken establishes an allowance for impairment of loans that represents its estimate of incurred losses. The main components
:this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component
;tablished for groups of similar customers in respect of losses that have been incurred but not yet identified. The collective loss
llowance is determined based on historical data of payment statistics.
n a few countries the issue of new loans is outsourced to third parties. In most cases, Heineken issues sureties (guarantees) to the
hird party for the risk of default of the customer. Heineken in return receives a fee.
;eineken N.V. Annual Report 2010
