Financial statements Notes to the Consolidated Financial Statements continued For the 52 weeks ended 26 June 2021 17 Financial risk management The Board of Directors has overall responsibility for the oversight of the Group’s risk management framework. A formal process for reviewing and managing risk in the business is in place. CREDIT RISK Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s deposits with banks and financial institutions as well as foreign exchange hedging agreements with its banking counterparties. The Group only deals with creditworthy counterparties and uses publicly available financial information to rate its counterparties, therefore credit risk is considered to be low. Group policy is that surplus funds are placed on deposit with counterparties approved by the Board, with a minimum of an ‘A’ credit rating. The credit limit for the syndicate banks is £75m. All other parties are limited to £25m. The Group’s maximum exposure to credit risk is represented by the carrying amount of financial assets. No collateral is held (2020: nil). At the period end the maximum exposure is detailed in the table below. 2021 2020 £’m £’m Current Cash and cash equivalents 128.6 90.0 Trade and other receivables 5.7 9.8 Accrued income 0.3 0.1 Derivative financial instruments 0.4 5.0 Total current financial assets 135.0 104.9 Non-current Derivative financial instruments 0.3 1.6 Total financial assets 135.3 106.5 Trade and other receivables include rebates due from suppliers recognised as a reduction to cost of sales in the period to which they relate. The rebates are recovered through deductions from future payments to suppliers and therefore management is confident of the recoverability of these balances. The Group applies the IFRS 9 simplified approach to measuring expected credit losses (ECL) which uses a lifetime expected loss allowance for all trade and other receivables and accrued income. To measure the expected credit losses, trade and other receivables and accrued income have been grouped based on shared credit risk characteristics and the days past due. There is limited exposure to ECL due to the way the Group operates. The Group will write off, either partially or in full, the gross carrying amount of a financial asset when there is no realistic prospect of recovery. This is usually the case when it is determined that the debtor does not have the assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, the Group may still choose to pursue enforcement in order to recover the amounts due. On that basis, the loss allowance as at 27 June 2020 and 26 June 2021 was determined to not be significant for trade and other receivables, accrued income and cash and cash equivalents. LIQUIDITY RISK Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and extreme circumstances. The Group manages this risk by continuously monitoring cash flow forecasts. Further details of the Group’s available facilities can be found in the capital management section of this note. All cash flows on financial liabilities for 2021 and 2020 are contractually due within one year with the exception of lease liabilities, the details of which are shown in note 11, provisions and derivative financial liabilities. Total borrowings of nil (2020: £45.0m) reflect the level of facility drawdown at the period end on the Group’s Revolving Credit Facility. 206 DUNELM GROUP PLC ANNUAL REPORT & ACCOUNTS 2021