MONCLER ANNUAL REPORT AT 31 DECEMBER 2020SEPARATE FINANCIAL STATEMENTS 173172

7.

INFORMATION ABOUT FINANCIAL RISKS

The Company s financial instruments include cash and cash equivalents, loans, receivables and trade payables and other current receivables and payables and non-current assets as well as derivatives. The Company is mostly exposed to interest rate risk, liquidity risk and capital risk.

7.1. MARKET RISK

EXCHANGE RATE RISK

The Company operated mostly with companies in euros and, as such, the exposure to exchange rate risk is limited. As at 31 December 2019, a small portion of the Company s assets and liabilities (i.e. trade receivables and payables) were denomi- nated in a currency different from its functional currency.

INTEREST RATE RISK

The Company s exposure to interest rate risk during 2020 is connected mostly to changes in interest rates relate to out- standing loans.

As at 31 December 2020 the Company had no bank loans and therefore there were no interest rate hedges, conse- quently any changes in interest rates at the year-end date would not have significant effects on the result of the year. The Company is not exposed to changes in currency interest rates.

7.2. CREDIT RISK

The Company has no significant concentrations of credit risk with companies that are not part of the Group. The maximum exposure to credit risk is represented by the amount reported in the financial statements.

As far as the credit risk arising from other financial assets (including cash, short-term bank deposits and some financial derivative instruments) is concerned, the credit risk for the Company arises from default of the counterparty with a max- imum exposure equal to the carrying amount of financial as- sets recorded in the financial statements.

7.3. LIQUIDITY RISK

Liquidity risk arises from the ability to obtain financial re- sources at a sustainable cost in order for the Group to con- duct its daily business operations. The factors that influence this risk are related to the resources generated/absorbed by operating activities, by investing and financing activities and by availability of funds in the financial market.

Management believes that the financial resources availa- ble today, along with those that are generated by the current operations will enable the Company to achieve its objectives and to meet its investment needs and the repayment of its debt at the agreed upon maturity date.

7.4. OPERATING AND CAPITAL MANAGEMENT RISKS

In the management of operating risk, the Company s main objective is to manage the risks associated with the develop- ment of business in foreign markets that are subject to specif- ic laws and regulations. The Group has implemented guidelines in the following areas: appropriate level of segregation of duties; reconciliation and constant monitoring of significant

transactions; documentation of controls and procedures; technical and professional training of employees; periodic assessment of corporate risks and identification

of corrective actions. As far as the capital management risk is concerned, the Com- pany s objectives are aimed at the going concern issue in or- der to ensure a fair economic return to shareholders and other stakeholders while maintaining a good rating in the capital debt market. The Company manages its capital structure and makes adjustments in line with changes in general economic conditions and with the strategic objectives.