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.
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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. |
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Sensitivity analysis of interest rate risk exposure |
Effect on |
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2018 |
Risk variable |
Change in risk variable |
Surplus/ (deficit) |
Equity |
|
% |
$'000 |
$'000 |
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Overnight cash deposits with the RBA |
Deposit rate |
+0.2% |
2,435 |
- |
|
-0.2% |
(2,435) |
- |
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Investments in CCEs |
Discount rate |
+0.2% |
- |
1,907 |
|
-0.2% |
- |
(1,874) |
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2017 |
% |
$'000 |
$'000 |
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Overnight cash deposits with the RBA |
Deposit rate |
+0.3% |
3,521 |
- |
|
-0.3% |
(3,521) |
- |
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Investments in CCEs |
Discount rate |
+0.3% |
- |
(2,313) |
|
-0.3% |
- |
2,374 |
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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.
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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. |
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Gross exposure to all credit risk and credit quality of financial assets |
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Departmental |
Administered |
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30 June |
30 June |
30 June |
30 June |
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2018 |
2017 |
2018 |
2017 |
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Note ref |
$'000 |
$'000 |
$'000 |
$'000 |
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Financial assets |
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Not past due nor impaired |
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Cash and cash equivalents |
772,294 |
749,798 |
1,731,032 |
937,956 |
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Trade receivables |
3,089 |
47,265 |
1,446 |
182 |
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Investment funds - loans and receivables |
C2.2 |
- |
- |
7,979,610 |
6,501,484 |
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Investment funds - financial assets at FVPL |
C2.2 |
- |
- |
21,844,193 |
16,190,822 |
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State and Territory Government loans |
- |
- |
133,121 |
139,752 |
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Accrued revenue |
5,889 |
11,770 |
9,583 |
2,213 |
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Government securities |
- |
- |
- |
1,472 |
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Total not past due nor impaired |
781,272 |
808,833 |
31,698,985 |
23,773,881 |
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Past due or impaired |
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Trade receivables |
975 |
27,034 |
380 |
539 |
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Total past due or impaired |
975 |
27,034 |
380 |
539 |
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Total financial assets |
782,247 |
835,867 |
31,699,365 |
23,774,420 |
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Ageing of financial instrument assets that were past due or impaired |
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0 to 30 days |
236 |
26,911 |
117 |
10 |
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31 to 60 days |
185 |
18 |
21 |
8 |
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61 to 90 days |
64 |
7 |
19 |
94 |
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90+ days |
490 |
98 |
223 |
427 |
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Total past due but not impaired |
975 |
27,034 |
380 |
539 |
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Visit
https://www.transparency.gov.au/annual-reports/department-finance/2018/part-5-financial-statements/managing-financial-risk