Consolidated Financial Statements >
Directors’ Report
102
| 2012 annual report prysmian group
Credit risk
Credit risk is the Prysmian Group’s exposure to potential
losses arising from the failure of trade or financial
counterparties to discharge their obligations. This risk is
monitored centrally by the Group Finance Department, while
customer-related credit risk is managed operationally by the
individual subsidiaries. The Group does not have significant
concentrations of credit risk. It nonetheless has procedures
for ensuring that its trade counterparties are of recognised
reliability and that its financial counterparties have high credit
ratings.
As part of the integration process, the Group has negotiated
and concluded a global trade credit insurance policy to replace
the two existing policies. The scope of coverage has been
extended to all Group companies and the insurability criteria
for trade receivables has been revised in order to maximise
coverage.
A more detailed analysis of the risk in question can be
found in the “Financial Risk Management” section of the
Explanatory Notes to the Consolidated Financial Statements.
Liquidity risk
Liquidity risk is the risk that an entity does not have sufficient
financial resources to meet its obligations to trade or financial
counterparties on the agreed due dates.
With regard to the Prysmian Group’s working capital cash
requirements, these increase significantly during the first half
of the year when it commences production in anticipation of
order intake, with a consequent temporary increase in net
financial debt.
Prudent management of liquidity risk involves the
maintenance of adequate levels of cash, cash equivalents
and short-term securities, the maintenance of an adequate
amount of committed credit lines, and timely renegotiation
of loans before their maturity. Due to the dynamic nature
of the business in which the Prysmian Group operates, the
Group Finance Department favours flexible arrangements for
sourcing funds in the form of committed credit lines.
As at 31 December 2012, the Group had financial resources,
including cash and cash equivalents and undrawn committed
credit lines, in excess of Euro 1 billion. A more detailed
analysis of the risk in question can be found in the “Financial
Risk Management” section of the Explanatory Notes to the
Consolidated Financial Statements.
