REA Group Ltd Annual Report 2021

Annual Report 2021 | REA Group Ltd 9. Financial risk management (continued) (g) Credit risk Nature of risk Risk management Material arrangements Exposure Credit risk can arise from the non-performance by counterparties of their contractual financial obligations towards the Group. The Group is exposed to credit risk from its operating activities (primarily from trade receivables and commission contract assets) and from its financing activities, including deposits with financial institutions. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures, which may include an assessment of their financial position, past experience and industry reputation, depending on the amount of credit to be granted. Receivable balances are monitored on an ongoing basis. Refer to Note 14 for further details on the expected credit loss policy. Credit risk arising from other financial assets, i.e. cash and cash equivalents, arises from default of the counterparty. The Group’s treasury policy specifies a minimum long term “BB” or better investment grade risk rating for financial institutions in order to transact with the Group. The gross trade receivables balance at 30 June 2021 was $125.1 million (2020: $93.5million). Refer to Note 14 for an aging analysis of this balance. As at 30 June 2021, the Group held cash and cash equivalents of $168.9 million (2020: $222.8million) of which $0.5million (2020: $0.4 million) was held in short-term deposits. The Group’s maximum exposures to credit risk at balance date in relation to each class of recognised financial assets is the carrying amount of those assets. Refer to Note 14 for details on the provision for expected credit losses as at 30 June 2021. (h) Liquidity risk Nature of risk Risk management Material arrangements Exposure Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations as they fall due. Liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Liquidity risk is managed via the regular review of forecasted cash inflows and outflows, with any surplus funds being placed in short term deposits to maximise interest revenue. Principally the Group sources liquidity from cash generated from operations and where required external bank facilities. The gross trade receivables balance at 30 June 2021 was $125.1 million (2020: $93.5million). Refer to Note 14 for an aging analysis of this balance. As at 30 June 2020, the Group held cash and cash equivalents of $168.9 million (2020: $222.8million), of which $0.5million (2020: $0.4million) was held in short-term deposits. The Group also had access to the Bridge facility with an undrawn amount of $106.3million. See further details in section (i) on the Group’s contractual maturities of financial assets and liabilities. The table below categorises the Group’s financial liabilities into their relevant maturity groupings. The amounts included are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. Year in review Directors’ Report Financial Statements Remuneration Report Sustainability Our Leaders 89