NOTES TO THE FINANCIAL STATEMENTS
RAMSAY HEALTH CARE LIMITED
IV Risk management
This section discusses the Group’s exposure to various risks and shows how these could affect the Group’s financial position
17 Financial risk management
This note provides a summary of the Group’s exposure to key financial risks, including interest rate, foreign currency, credit and
liquidity risks, along with the Group’s policies and strategies to mitigate these risks. There have been no material changes to our
risk management policies since 30 June 2020.
Primary responsibility for identification and control of financial risks rests with the Audit Committee under the authority of the Board. The Board
reviews and agrees policies for managing each of the risks identified below, including the setting of limits for trading in derivatives, hedging
cover of foreign currency and interest rate risk, credit allowances, and future cash flow forecast projections.
The Group's principal financial instruments comprise receivables, payables, bank loans and overdrafts, cash and short-term deposits,
derivatives, and other financial assets.
The Group manages its exposure to key financial risks, including market risk (interest rate and foreign currency risk), credit risk and liquidity risk
in accordance with the Group's financial risk management policy. The objective of the policy is to support the delivery of the Group's fi nancial
targets whilst protecting future financial security.
The Group enters into derivative transactions, principally interest rate swap contracts and foreign exchange forward contracts. The purpose
is to manage the interest rate and currency risks arising from the Group's operations and its sources of finance. The main risks arising from
the Group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Group uses different methods to
measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign
exchange risk and assessments of market forecasts for interest rate and foreign exchange. Ageing analyses and monitoring of specific credit
allowances are undertaken to manage credit risk and liquidity risk is monitored through the development of future rolling cash flow forecasts.
The Group has entered into a Syndicated Facility Agreement with its Banks. The Syndicated Facility Agreement is with prime financial
institutions. By entering into a Syndicated Facility Agreement with a number of financial institutions compared to financing through a Bilateral
Facility Agreement, the Group has reduced its counterparty risk.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates.
The Group's exposure to market interest rates relates primarily to the Group's long-term debt obligations with floating interest rates. The level of
debt is disclosed in Note 8.b.
At reporting date, the Group had the following mix of financial assets and liabilities exposed to variable interest rate risk that are not designated
in cash flow hedges:
Cash and cash equivalents 1,004.8 1,503.7
Business combination amounts held in escrow 1,958.1 -
Bank Loans (3,070.2) (1,815.0)
Net exposure (107.3) (311.3)
Interest rate derivatives contracts are outlined in Note 8.d, with a net negative fair value of $38.1 million (2020: negative $51.3 million) which are
exposed to fair value movements if interest rates change.
112 Annual Report 2021