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Notes to the Consolidated Financial Statements (continued)
11.5 Credit, liquidity and market risk
Introduction Report of the Executive Board Report of the Supervisory Board
This note summarises the financial risks that HEINEKEN is exposed to, and HEINEKEN's policies and
processes that are in place for managing these risks. For more information on derivatives used in managing
risk refer to note 11.6.
Risk management framework
The Executive Board sets rules and monitors the adequacy of HEINEKEN's risk management and
control systems. These systems are regularly reviewed to reflect changes in market conditions and
Managing the financial risks and financial resources includes the use of derivatives, primarily spot and
forward exchange contracts, options and interest rate swaps. It is HEINEKEN's policy not to enter into
In the normal course of business HEINEKEN is exposed to the following financial risks:
- Credit risk
- Liquidity risk
- Market risk
Credit risk is the risk of a loss to HEINEKEN when a customer or counterparty fails to pay.
All local operations are required to comply with the Global Credit Policy and develop local credit
management procedures accordingly. HEINEKEN regularly reviews and updates the Global Credit Policy
ensuring that adequate controls are in place to mitigate credit risk.
Credit risk arises mainly from HEINEKEN's receivables from customers like trade receivables, loans to
customers and advances to customers. At the balance sheet date, there were no significant concentrations
of credit risk.
Heineken N.V. Annual Report 2018
Loans and advances to customers
HEINEKEN's loans and receivables include loans and advances to customers. Loans and advances to
customers are secured by, among others, (bank) guarantees, rights on property or intangible assets, such
as the right to take possession of the premises of the customer. HEINEKEN charges interest on loans to
Trade and other receivables
HEINEKEN's local management has credit policies in place and the exposure to credit risk is monitored on
an ongoing basis. Under these policies all customers requiring credit above a certain amount are reviewed
and new customers are analysed individually for creditworthiness before HEINEKEN's standard payment
and delivery terms and conditions are offered. This review can include external ratings, where available,
and in some cases bank references. Credit limits are determined for each customer and are reviewed
regularly. Customers that fail to meet HEINEKEN's credit requirements transact only with HEINEKEN on
a prepayment basis or Cash on Delivery.
Customers are monitored, on a country basis, according to their credit risk characteristics, including whether
they are an individual or legal entity, type of distribution channel, geographic location, ageing profile,
maturity and existence of previous financial difficulties.
HEINEKEN has a policy in place in respect of compliance with Anti Money Laundering Laws.
HEINEKEN considers it important to know with whom business is done and from whom payments
HEINEKEN establishes allowances for impairment of loans and advances to customers, trade and other
receivables using an expected credit losses model. These allowances cover specific loss components that
relates to individual exposures, and a collective loss component established for groups of similar customers.
The collective loss allowance is determined based on historical data of payment statistics and updated
periodically to incorporate forward looking information. The loans and advances to customers, trade
and other receivables are written off when there is no reasonable expectation of recovery.
HEINEKEN limits its exposure to credit risk by only investing available cash balances in deposits and
liquid investments with counterparties that have strong credit ratings. HEINEKEN actively monitors these