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105
Notes to the Consolidated Financial Statements
11.5 Credit, liquidity and market risk
Heineken N.V.
Annual Report 2020
Introduction
Report of the
Executive Board
Report of the
Supervisory Board
Financial
Statements
Sustainability
Review
Other
Information
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
HEINEKEN's activities.
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
speculative transactions.
In the normal course of business HEINEKEN is exposed to the following financial risks:
- Credit risk
- Liquidity risk
- Market risk
Credit 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 reviews and updates the Global Credit Policy periodically
to ensure 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.
Loans and advances to customers
HEINEKEN's loans and receivables include loans and advances to customers. Loans and advances to
customers are usually backed by collateral such as properties. HEINEKEN charges interest on loans to
its customers.
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 either a
prepayment or cash on delivery basis.
Customers are monitored, on a country basis, according to their credit risk characteristics. Distinction is
made between individuals and legal entities, 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 are received.
Allowances
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
relate 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.
Due to the uncertainty relating to the depth and duration of the COVID-19 pandemic and its related impact
on HEINEKEN's customers, more judgement is required in the calculation of expected credit losses compared
to previous years. As part of these assessments, HEINEKEN has incorporated all reasonable and supportable
information available such as whether there has been a breach or deterioration of payments terms, a request
for extended payment terms or a request for waived payment terms.
Investments
HEINEKEN invests centrally available cash balances in deposits and liquid investments with various
counterparties that have strong credit ratings. HEINEKEN actively monitors these credit ratings.
Guarantees
HEINEKEN's policy is to avoid issuing guarantees unless this leads to substantial benefits for HEINEKEN.
For some loans (to customers) HEINEKEN does issue guarantees. In these cases HEINEKEN aims to receive
security from the customer to limit the credit risk exposure.
Heineken N.V. has issued a joint and several liability statement to the provisions of Section 403, Part 9, Book
2 of the Dutch Civil Code with respect to legal entities established in the Netherlands. Refer to note A. 1 of
the Company financial statements.
