Lendlease Annual Report 2022

Financial Statements 151 Section D. Risk Management The Group’s activities expose it to a variety of financial risks. The Group’s overall financial risk management strategy focuses on the unpredictability of financial markets and seeks to minimise adverse effects on the Group’s performance. Treasury policies have been approved by the Board for managing this risk. This section contains disclosures of financial risks the Group is exposed to and how the Group manages these risks. The impact of contingent liabilities is also considered in this section. 24. Financial Risk Management The Group operates across numerous jurisdictions and markets. The Lendlease Asset and Liability Committee oversees the management of the Group’s treasury risks, within the parameters of a Board approved Treasury Policy, and maintains a Group wide framework for financial risk management and reviews issues of material risk exposure within the scope of the Treasury Policy. A summary of key risks identified, exposures and management of exposures is detailed in the table below: Risks Identified Definition Exposures Management of Exposures Foreign Currency The risk in local currency terms that the value of a financial commitment or a recognised asset or liability will fluctuate due to changes in foreign currency exchange rates • Foreign currency earnings • Net investments in foreign operations • Transactions settled in foreign currency • Further information on exposures is detailed in Note 24a ‘Foreign Currency Risk Exposure’ • Physical financial instruments, including natural hedges from matching foreign assets and liabilities • Derivative financial instruments, mainly foreign exchange contracts • Contracting out • Speculative trading is not permitted Credit The risk that a counterparty will not be able to meet its obligations in respect of a financial instrument, resulting in a financial loss to the Group • Recoverability of loans and receivables • Recoverability of other financial assets and cash deposits • Further information on exposures is detailed in Note 24b ‘Credit Risk Exposure’ • Policies in place so that customers and suppliers are appropriately credit assessed • Treasury Policy sets out credit limits for each counterparty based on minimum investment grade ratings Liquidity The risk of having insufficient funds to settle financial liabilities as and when they fall due • Insufficient levels of committed credit facilities • Settlement of financial liabilities • Further information on exposures is detailed in Note 19 ‘Liquidity Risk Exposure’ • Maintaining sufficient levels of cash and committed credit facilities to meet financial commitments and working capital requirements • Managing to funding portfolio benchmarks as outlined in the Treasury Policy • Timely review and renewal of credit facilities Interest Rate The risk that the value of a financial instrument or cash flow associated with the instrument will fluctuate due to changes in market interest rates • Financial assets, mainly cash at bank • Financial liabilities, mainly borrowings and financing arrangements • Further information on exposures is detailed in Note 24c ‘Interest Rate Risk Exposure’ • Physical financial instruments • Derivative financial instruments, mainly interest rate swaps • Managing to hedging limits in respect of recourse funding as outlined in the Treasury Policy • Speculative trading is not permitted Equity Price The risk that the fair value of either a traded or non traded equity investment, derivative equity instrument, or a portfolio of such financial instruments, increases or decreases in the future • All traded and/or non traded financial instruments measured at fair value • Material investments within the portfolio are managed on an individual basis. The Group’s portfolio is monitored closely as part of capital recycling initiatives