McConnell Dowell 2020 Annual Review

90 McConnell Dowell Group 20. Financial risk management objectives and policies (continued) Interest rate risk The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s cash and cash equivalents. All interest bearing loans and borrowings (see Note 15) are at fixed rates. Given the nature of financial assets and liabilities exposed to interest rate risk, management does not consider interest rates to be a significant risk to the Group. The Group does not have any interest rate swaps in place, but does constantly analyse its interest rate exposure. Within this analysis consideration is given to existing positions, alternative financing and the mix of fixed and variable interest rates. As at balance date, the Group had the following exposure to interest rates: The following sensitivity analysis is based on the interest rate risk exposure in existence at the balance date, with all other variables remaining constant: At balance date, had interest rates moved, as illustrated in the table below, post tax profit and equity would have been affected as follows: All figures are in A$ 000’s 2020 2019 Financial assets Cash and cash equivalents 139,204 102,843 Total financial assets 139,204 102,843 Total exposure 139,204 102,843 Consolidated Credit risk Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and trade and other receivables. The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. No collateral is held as security. There are no significant concentrations of credit risk. Loans receivable from associate companies and joint arrangements comprise a number of entities. The group also holds letters of credit with certain financial institutions. Exposure at balance date is addressed in each specific note. The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating and industry reputation. Risk limits are set and monitored for each individual customer in accordance with parameters set up by the board. Credit value represents the credit quality of the amounts. All figures are in A$ 000’s 2020 2019 2020 2019 Consolidated 100 basis point increase in interest rates with all other variables held constant 974 720 974 720 100 basis point fall in interest rates with all other variables held constant (974) (720) (974) (720) Equity Higher / (lower) Post tax profit Higher / (lower) Notes to the annual financial statements (continued) for the year ended 30 June 2020