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Financial risks

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Financial risks

The Group’s Global Risk Management program focuses on uncertainty in the financial markets and aims to minimize potential adverse effects on Group and shareholder profitability.

Risks are managed by the Group’s Finance Department. This department identifies, evaluates and mitigates financial risks in close collaboration with the Group’s business units.

The Group’s activities are exposed to various financial risks: market risk (exchange rate risk, interest rate risk), credit risk and liquidity risk.

Market risk

A- Interest-rate risk

The Group interest-rate risk arises from the fluctuations in interest rates that affect the financial costs of non- current borrowings issued at variable interest rates.

In line with its risk management policy, the Group arranges various interest rate hedges to mitigate its risk exposure. As of 31 December 2016 and 2015, there were no outstanding derivatives with external counterparties to hedge the interest rate of long-term financing.

During 2016, the percentage of fixed-interest debt on the average gross debt volume was 59.33% versus 78.70% in the previous year.

The Group’s policy for financial assets is to keep ready cash to use. These balances are held in financial institutions with high credit ratings.

B- Currency risk

Operational: cash flows

Fluctuations in currencies, other than the local currency, may have a positive or negative impact on the consolidated accounts. The Group seeks to minimize the risk through the negotiation of forward currency contracts managed by the Group’s Treasury Department. The amount of annual hedging transactions carried out during 2016 amounted to USD6.552m and USD5.359m in 2015. This amount represented 66.09% of the transactions carried out in this currency in 2016 (98.38% in 2015). At the end of 2016, outstanding hedges in dollars amounted to USD1.803m (USD1.284m in 2015), and expire in the next eleven months. These transactions are not significant in comparison with the Group’s total purchases. 


The Group holds investments in foreign operations, the net assets of which are exposed to currency risk. Currency risk affecting net assets of the Group’s foreign operations in Argentinian Pesos, Chinese Yuan and Brazilian Real is mitigated primarily through borrowings in the corresponding foreign currencies.

The translation differences included in other comprehensive income are significant due to the sharp devaluations of the Argentinian Peso and the Brazilian Real. If the exchange rates in the countries where the Group operates that use a currency other than the Euro had depreciated/appreciated by 10%, the translation differences would have varied by +32.71% / -32.71%, respectively, in the equity of the DIA Group.

C- Risk on financial instruments 

The Parent company has “Equity Swap” contracts worth EUR39.944m. At the end of 2015, they amounted to EUR42.266m. Both operations have been performed to meet the payment obligations arising from the LTIP program (Long-Term Incentive Plan) to the Group Executives. Details are included in note 16 of the Notes of the Consolidated Annual Accounts. The derivative financial instrument is registered in the consolidated Net Equity.

Credit risk

The Group is not significantly exposed to credit risk. The Group has active risk policies to ensure that its wholesale customers have adequate credit quality. Retail sales pose less risk in that they are settled in cash or by credit card.

Derivative and cash transactions are performed with financial institutions that have high credit ratings, with minimum ratings of BBB. In countries where the rating is below that rating, it operates with local financial entities that are considered high credit quality by local standards.

Also, the Group places cash surplus in high credit quality assets and maximum liquidity. Policies established by the Executive Management of the Group are based on criteria of liquidity, solvency and diversification, establishing maximum amounts invested by counterparty, within a maximum term of 90 days of investment duration and definition of the instruments to which the surplus placement is authorized.

Liquidity risk

Recommendations regarding the information on this type of risk, its possible impact on the Company and the policies carried out by the same in order to mitigate it, are included in note 3 “Liquidity and capital resources” in section 3.1. Liquidity. We refer to this section.

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