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Managing financial risk

D2: Managing financial risk

Finance is generally exposed to a low level of risk in relation to its financial instruments with the exception of the investment funds which are exposed to a moderate level of risk commensurate with the types of financial instruments held and the markets in which those instruments are traded. These risks are discussed as part of the investment funds (Note C2). Non-investment fund risks are discussed below.

D2.1 Market risk

Market risk refers to the risk that a change in market parameters will impact on assets held by Finance. Other than balances held by the investment funds, investments in CCEs and the OPA which are exposed to interest rate risk and foreign currency risk, Finance holds basic financial instruments that are not exposed to market risks. The following table discloses market risks in relation to the OPA and investments in CCEs. Disclosures in relation to the investment funds are included as part of Note C2.3.1.

Sensitivity analysis of interest rate risk exposure

Effect on

2018

Risk variable

Change in risk variable

Surplus/ (deficit)

Equity

%

$'000

$'000

Overnight cash deposits with the RBA

Deposit rate

+0.2%

2,435

-

-0.2%

(2,435)

-

Investments in CCEs

Discount rate

+0.2%

-

1,907

-0.2%

-

(1,874)

2017

%

$'000

$'000

Overnight cash deposits with the RBA

Deposit rate

+0.3%

3,521

-

-0.3%

(3,521)

-

Investments in CCEs

Discount rate

+0.3%

-

(2,313)

-0.3%

-

2,374

D2.2 Liquidity risk

Liquidity risk is the risk that an entity will be unable to pay its debts when they fall due. As Finance is appropriation funded, the risk of Finance not meeting its obligations associated with financial liabilities is highly remote. Internal policies and procedures are also in place to ensure there are appropriate resources available to meet obligations. Finance's credit terms for goods and services are payment within 30 days. Disclosures in relation to the investment funds are included as part of Note C2.3.2.

D2.3 Credit risk

Credit risk is the risk that entities owing debts to Finance will not pay those debts as and when they fall due. Finance is exposed to a moderate level of credit risk in relation to the investment fund's assets; all other financial assets are considered to be low risk. Trade and other receivables (excluding State and Territory Government loans) have standard 30 days terms. Additional disclosures for the investment funds credit risk are included in Note C2.3.3.

Gross exposure to all credit risk and credit quality of financial assets

Departmental

Administered

30 June

30 June

30 June

30 June

2018

2017

2018

2017

Note ref

$'000

$'000

$'000

$'000

Financial assets

Not past due nor impaired

Cash and cash equivalents

772,294

749,798

1,731,032

937,956

Trade receivables

3,089

47,265

1,446

182

Investment funds - loans and receivables

C2.2

-

-

7,979,610

6,501,484

Investment funds - financial assets at FVPL

C2.2

-

-

21,844,193

16,190,822

State and Territory Government loans

-

-

133,121

139,752

Accrued revenue

5,889

11,770

9,583

2,213

Government securities

-

-

-

1,472

Total not past due nor impaired

781,272

808,833

31,698,985

23,773,881

Past due or impaired

Trade receivables

975

27,034

380

539

Total past due or impaired

975

27,034

380

539

Total financial assets

782,247

835,867

31,699,365

23,774,420

Ageing of financial instrument assets that were past due or impaired

0 to 30 days

236

26,911

117

10

31 to 60 days

185

18

21

8

61 to 90 days

64

7

19

94

90+ days

490

98

223

427

Total past due but not impaired

975

27,034

380

539