Econocom - 2020 annual report

06 consolidated financial statements

notes to the consolidated financial statements

Risk management 19. Capital adequacy 19.1. framework

MARKET RISK 19.2.1. At the end of the year, Group Management fixes all of the rates to be applied in the following year’s budgeting process. The Group manages its exposure to interest rate and currency risks by using hedging instruments such as swaps and foreign exchangeforwardcontracts. These derivative financial instruments are used purely for hedging andnever for speculative purposes. Currency risk 19.2.1.1. The Group operates chiefly in the eurozone; however, following the expansion of operations in non-eurozone countries in Europe, as well as North and South America, the Group may be exposed to currency risk on other currencies. The table below summarises the sensitivity of certain consolidated income statement lines to an increase or decrease of 10% in exchange rates against the euro, linked to the translation of the subsidiaries’ foreign currency accounts.

The Group seeks a level of gearing that maximises value for shareholders while maintaining the financial flexibility that is required toimplementits strategicprojects. Treasury shares are detailed in Note 15.3.3. The only potentially dilutive instruments are free shares granted under performance share plans, stock options (see note 15) and convertible bonds (see note 14). Risk management 19.2. policy The Group’s activities are subject to certain financial risks: market risk (including currency risk, interest rate risk and price risk), liquidity riskand creditrisk. The Group’s overall financial risk management policy focuses on reducing exposure to credit risk and interest rate risk by transferring finance lease receivables to refinancing institutions and by using factoringsolutionson a non-recoursebasis in the Digital Services & Solutions businesses. Financial market risks (interest rate and currency risk) and liquidity risks are handled by Group Management.

244 2020 annual report