7Financial information

Financial risk management

Financial risk management

The Group's policy is to cover all significant exposure to risks as long as there are appropriate instruments and the cost of hedging is reasonable for the risks covered. Financial risk management is controlled by the Group's Economics and Finance Management, who take the appropriate decisions with the prior authorization of Saba’s Chief Executive Officer and Board of Directors.

Below are the main financial risks which have been identified:

Exchange rate risk: The Group operates internationally and owns assets in the United Kingdom, Chile and the Czech Republic, and is thus exposed to exchange rate risk in operations with the British pound sterling, the Chilean peso and, additionally, the Czech crown. This exchange rate risk arises from future commercial transactions, recognized assets and liabilities and net investments in operations abroad.

In this sense, a variation of 10% in the euro/sterling, euro/Chilean peso and/or euro/Czech crown exchange rates compared to those considered at the end of December 31, 2019 would have little impact on Saba's profit and loss and assets. Along the same lines, the Group uses derivative financial instruments to manage fluctuations in exchange rates.

Interest rate risk: The interest rate risk to which the Company may be exposed arises from external financing. External financing issued at variable rates exposes the Group to interest rate risk of cash flows, while non-fixed interest rate financing expose the company to interest rate risks on fair value. Saba uses derivative financial instruments to manage fluctuations in interest rates, exchanging debt at variable interest for debt at a fixed rate, thus maintaining a balance between debt at variable and fixed rates.

Credit risk: This arises from cash and equivalents, as well as from trade debtors and other debts, including pending accounts receivable and committed transactions.

In relation to banks and financial institutions, the company only works with financial institutions with proven creditworthiness. This creditworthiness is reviewed periodically.

In relation to trade debtors, the Group assesses the creditworthiness of the customer, taking into account its financial position, past experience and other factors. Individual credit limits are established based on internal ratings.

Liquidity risk: The Group conducts prudent management of liquidity risk, ensuring that there is sufficient cash and liquid assets, as well as enough funds to ensure fulfilment of its payment obligations.

Inflationary risk: Most car park concessions generate revenues whose rates vary in correlation to inflation, so the increase in rates would mitigate the potential increase in costs in a scenario of rising inflation.