Financial risks

International operations such as those at SSAB involve a number of financial risks in the form of financing, liquidity, interest rate, currency and credit risks. The management of these risks is governed by the Group’s Finance Policy, which has been adopted by the Board of Directors. Most financial transactions take place through the parent company's treasury function in Stockholm and through SSAB Finance in Ireland. For further information about the Group’s financial risk management, see Note 29 (p. 202) in SSAB’s Annual Report 2019.

Risk factor Risk description Response and initiatives
REFINANCING RISK/
LIQUIDITY RISK
‘Refinancing risk/liquidity risk’ means
the risk of SSAB being unable to pay
its obligations due to insufficient liquidity
or difficulties in raising new loans.
The borrowing strategy is focused on securing the Group’s needs for loan financing with
regard to long-term loans and SSAB’s day-to-day payment obligations to its lenders and
suppliers. Borrowing takes place primarily through the parent company, taking into
consideration the Group’s financial targets. In order to minimize the refinancing risk, the
objective is that long-term loans will have an even maturity and an average term to maturity
in excess of three years. The liquidity buffer, i.e. non-utilized, binding credit facilities, as well
as cash and cash equivalents, shall, depending on the net debt/equity ratio, exceed 5-10
percent of the Group's sales. 
MARKET RISK Market risks comprise the risk of the
Group’s earnings or financial position
being affected by movements in market
prices, such as interest rates and
exchange rates.
Interest rate risks:
The Group’s interest rate risks relate to movements in market interest rates and their impact
on the debt portfolio. The average fixed-rate term in the total debt portfolio should be
approximately 1 year, but is permitted to vary between 0.5 and 2.5 years.
Currency risks:
SSAB’s currency exposure related to translation exposure, largely relates to the translation
risk regarding net assets of foreign subsidiaries. This exposure
is partly hedged through borrowing
in foreign currency. The objective is to minimize the foreign exchange impact on the
net debt/equity ratio.
The Swedish krona (SEK) is the base currency. In order to manage
the transaction risk, contracted commercial currency flows are hedged. Major investments and projects
decided upon in foreign currency are hedged. The net currency inflow in 2019 was SEK 3.7 (4.7) billion.
The Group’s most important currency flows are shown in the diagram.
CREDIT RISK Credit risk’ means the risk of losses
due to the Group's customers or
counterparties in financial contracts
being unable to perform their
payment obligations.
Financial counterparties are selected based on Standard & Poor’s
and Moody’s current ratings for long-term borrowing and taking into
account the Group’s reciprocal commercial relations with the relevant counterparty.
The minimum acceptable ratings are A- from
Standard & Poor’s or A3 from Moody’s. Credit risks associated with accounts receivable
and other claims are managed in each division and subsidiary,
taking into account the Group’s credit directive.
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