131 / 364
4.1 CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 12. Organization of financial risks and derivatives management
DANONE
REGISTRATION DOCUMENT 2015
131
Note 12.6. Counterparty risk
Counterparty risk inherent in financial risk
management
Risk identification
The Group is exposed to counterparty risk, especially on banking
counterparties, as part of its financial risk management activities.
As part of its normal activities, the Group has financial institutions
as counterparties, mainly to manage its cash and foreign exchange
rate and interest rate risks. The failure of these counterparties to
comply with one or more of their commitments could adversely
affect the Group's financial situation.
Risk management
The Group's overall exposure to counterparty risk has been signi-
ficantly reduced through the centralization of financial risks and
implementation of centralization applications as well as its cash
management policy of minimizing and managing surpluses.
The Group's banking policy aims to apply deposit limits per counter-
party and emphasize the importance of its credit rating quality by
concentrating its transactions among first-tier counterparties that
(i) have credit ratings at least in the Single A category; (ii) possess
international branch networks and (iii) provide it with financing.
Moreover, in order to invest its short-term surpluses, the Group
mainly invests in either money-market funds (
SICAV monétaires
) or
short-term money-market funds (
SICAV monétaires court terme
),
which are not rated. These funds are very liquid and diversified.
The other short-term investments are made in accordance with
the Group's above-mentioned banking policy.
Finally, in certain countries, the Group may be obliged to conduct
transactions with local banks that have lower credit ratings.
Exposure related to short-term investments
See Note 10.4 of the Notes to the consolidated financial statements.
Exposure related to derivative instruments
As of December 31
(as a percentage of the total fair value as of December 31)
(a)
2014
2015
Counterparty rating (Standard & Poor's)
AAA, AA and A
79%
77%
BBB, BB and B
21%
23%
Unrated
–
–
(a) Total, when positive, of fair values of outstanding derivatives by counterparty as of December 31.
Fair value associated with derivatives counterparty risk
The valuation associated with derivatives counterparty risk is calculated on the basis of historical default probabilities derived from the
calculations of a leading rating agency, to which a recovery rate is applied. As of December 31, 2015 and December 31, 2014, the impact
associated with the adjustment required by IFRS 13 is not material.
Note 12.7. Securities risk
As of December 31
(in € millions)
Notes
2014
2015
Risk on Company shares
Treasury shares and DANONE call options
(a)
13.3
1,859
1,707
Risk on other shares
Investments in associates
4
2,146
2,882
Other non-consolidated investments
11.2
92
70
(a) DANONE call options acquired by the Company.