The Group’s financial activities are centralised in the Parent Company in order to benefit from economies of scale and to minimise handling risks. Activities are coordinated by the Parent Company, which executes all significant external financial transactions and serves as an internal bank for the Group's transactions in the foreign exchange and bond markets. Each year Indutrade's board of directors adopts a finance policy, which serves as the framework for managing financial risks and financial activities. The policy also regulates the applicable limits for counterparties.
Financing risk
Financing is the risk that financing of the Group's capital requirements is impeded or becomes more expensive. This risk is mitigated as far as possible by ensuring that the Company has a maturity structure that facilitates the taking of necessary alternative actions required to secure the raising of capital should this be necessary. Indutrade takes a central approach to the Group's financing. In principle, all external financing is conducted by the Parent Company, which then finances the Group's subsidiaries, both in and outside Sweden, in local currency. Group account systems are established in Sweden, Norway and the Netherlands.
The Group strives to strike a reasonable balance between equity, debt financing and liquidity, to enable the Group to secure financing at a reasonable capital cost. The Group's goal is that the net debt/equity ratio, defined as interest-bearing liabilities less cash and cash equivalents in relation to equity, will normally not exceed 100%.
Interest rate risk
Interest rate risk is the risk that unfavourable changes in interest rates will have an excessive impact on the Group’s net financial items and earnings. To limit the negative effect on the Group’s earnings caused by interest rate movements in the market, the Company maintains a staggered structure in the fixed-interest periods of its debt portfolio.
Currency risk
Currency risk is the risk of unfavourable movements in exchange rates affecting the Group’s consolidated earnings and equity measured in Swedish kronor (SEK). The Group’s net flows in foreign currencies are hedged primarily through currency clauses in customer contracts.
Customer and counterparty risk
Credit risk in the treasury management activities arise in connection with investments of cash and cash equivalents, and as counterparty risks in connection with the use of forward contracts. These risks are limited by using counterparties that have been approved in accordance with the guidelines stipulated in the finance policy. Assessment of credit risk in commercial transactions is handled by the individual subsidiaries. Indutrade’s exposure to individual customers is small, and the spread of risk is considered to be favourable.