Senior management’s objectives when managing the financial
- to safeguard the IIRC’s ability to continue as a going concern, to enable it to continue to meet its objectives; and
- to maintain sufficient financial resources to mitigate against risks and unforeseen events.
The operations of the IIRC expose the organization to various financial risks, which are continuously monitored with a view to protecting the IIRC against the potential adverse effects of these financial risks.
Credit risk arises principally from cash and cash equivalents and trade receivables. The IIRC minimizes its exposure by dealing with independently rated banks with a minimum rating of ‘A’. The IIRC’s trade receivables relate primarily to its Business Network participants, training partners, Council members and other organizations. The IIRC has no significant concentration of credit risk, with exposure spread over a large number of organizations and countries throughout the world. Management reviews Business Network participants’ balances regularly to ensure that the risk of exposure to bad debts is minimized.
The IIRC has also applied the simplified approach permitted by IFRS 9 which requires expected lifetime losses to be recognised from the initial recognition of the trade receivables.
Council member organizations are invoiced at the start of the calendar year in respect of voluntary contributions. Network participants are invoiced for their annual contributions at the beginning of the annual cycle. Training partners are also invoiced in advance. The IIRC manages its liquidity risk by ensuring that it has sufficient working capital to meet its short-term operating requirements. The IIRC aims to maintain cash reserves at least the equivalent of six months of operating expenditure.
Management of liquidity risk is achieved by monitoring budgets,
forecasts and actual cash flows. The number of network participants, training partners, Council members and other organizations that
provide voluntary contributions are continuously monitored to ensure adequate funding.
The IIRC monitors currency risk closely and considers that its current policies meet its objectives of managing exposure to currency risk.
The majority of IIRC’s transactions are carried out in sterling. In addition, IIRC holds accounts in US dollars and euros. To the extent possible, IIRC uses the income received in these currencies to hedge any exposures on payments made.
Interest rate risk
The IIRC maintains surplus funds in a treasury bank account. The average interest rate on this bank account is negligible. Both the current account and treasury bank account are classified as short-term. Short-term is defined as being three months or less. For a change in interest rates of 1%, the gross interest earned would be negligible.