Definition
The risk that the group will have insufficient liquid resources available to fulfil its operational plans and/or meet its financial obligations as they fall due.
Credit markets have been significantly disrupted since the second half of 2008 making it more challenging for companies to obtain funding.
Controls and procedures
- A board approved policy is in place to maintain committed borrowing facilities which provide funding headroom for at least the following 12 months.
- Liquidity is managed by an experienced central treasury department.
- There is daily monitoring of actual and expected cash flows.
- The group ‘borrows long and lends short’ meaning that the duration of the receivables book is significantly less than the average duration of the group’s funding.
- £250m 10-year senior public bonds issued in October 2009 and syndicated bank facilities extended in February 2010.
- Headroom on committed facilities of £331.0m as at 31 December 2009.
- See more commentary on liquidity risk.