(a) Financial risk management

The Company's activities expose it to a variety of financial risks. This note presents information about the Company's exposure to financial risks, the objectives, policies and processes for measuring and managing risk, and the management of capital.

The Board has overall responsibility for the establishment and oversight of the risk management framework. The Board has tasked the Audit and Risk Committee to oversee how management monitors compliance with the Company’s financial risk management policies and procedures. It also reviews the adequacy of the financial risk management framework of the Company.

(b) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities.

(iv) Trade and other receivables

The Company’s credit exposures to customers, including outstanding receivables and committed transactions, are minimal. The majority of current year revenue is from three customers, two of which are ASC Pty Ltd and its wholly owned subsidiary, ASC AWD Shipbuilder Pty Ltd. ASC Pty Ltd is a Government Business Enterprise owned by the Commonwealth of Australia which has a “AAA” credit rating from Standard & Poor’s. The Company therefore has immaterial exposure to credit risk in its operations.

(ii) Cash and cash equivalents

The Company limits its exposure to credit risk by placing its cash with a counterparty that has a credit rating of "Aa3" from Moody’s. Given the high credit rating, management does not expect the counterparty to fail to meet its obligations.

(iii) Guarantees

The Company has not issued any financial guarantees to any party during the period.

(iv) Financial securities received

The Company has received securities over assets under construction relating to the OSDP. The Company has not received financial securities from any other parties during the period.

(v) Recognised financial instruments

The credit risk on financial assets of the Company which have been recognised on the statement of financial position, is the carrying amount, net of any provision for doubtful debts as summarised below.

Off statement of financial position financial instruments

The Company has not entered into any off statement of financial position financial instruments during the period.

(c) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Maturities of financial liabilities

The tables below analyse the Company's financial liabilities into relevant maturity groups based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

(d) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

(i) Interest rate risk

As the Company holds cash in bank and no term interest-bearing assets, its exposure to changes in market interest rates is minimal.

The exposures of the Company to interest rate risk as well as the effective weighted average interest rate for classes of financial assets and financial liabilities are set out below:

The effective interest rate of the non-interest-bearing liabilities reflects the effective discount rate applied in calculating the present value of the liabilities. No discount rate was applied to the deferred purchase obligation of $15.4 million in the current year due to the loan being reclassified from non-current to current liabilities.

(ii) Sensitivity

There are no material changes or sensitivities related to market risk.

(iii) Capital risk management

The objectives of the Company in managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns for its Shareholder and benefits for other stakeholders and to sustain future development of the business. The Company monitors the return on capital.

There were no changes in the approach adopted by the Company in capital management during the year.