MCB Finance Group Plc
33
Notes to the consolidated financial statements (continued)
21 FINANCIAL INSTRUMENTS
Liquidity risk The Group maintains sufficient liquid resources in its operating currencies to meet its immediate working capital needs. Liquid resources are deposited with mainstream authorised banks or institutions with an equivalent level of prudential supervision. Cash deposits generally have a maturity of three months or less. Credit risk The Group is exposed to credit risk through its customer loans. The Group manages this risk by the verification of customer's identity, other personal and financial information, confirmation of an acceptable credit history, and daily reviews of the outstanding loan portfolio supported by procedures to monitor and manage the repayment process which includes the use of reputable and well-established credit collection agencies. If the Group's provision against its outstanding customer receivables at 31 December 2008 had been 3% higher or lower, and all other variables were held constant, then the Group's profit for the year ended 31 December 2008 would have decreased or increased by €131,488. The maximum exposure to credit risk is disclosed in note 12. Currency risk The Group currently operates within countries which either use its functional currency or whose currency is currently pegged to that currency. Foreign exchange risk is managed by ensuring any non-Euro cash receipts or payments are converted to Euros promptly. Interest rate risk The Group is exposed to interest rate risk primarily from its cash deposits which, because of their short maturities, earn interest on what is effectively a floating rate basis. Short-term borrowings are also arranged on a floating rate basis when required. If interest rates had been 0.5% higher or lower, and all other variables were held constant, then the Group's profit for the year ended 31 December 2008 would have increased or decreased by €2,000, due to the Group's exposure to variable interest rates on its cash deposits. The Group's sensitivity to interest rates is mitigated by its current use of fixed-rate short-term borrowings.
