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BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED
CONSOLIDATED ANNUAL REPORT 2015
BARBADOS PUBLIC WORKERS' CO-OPERATIVE CREDIT UNION LIMITED
Notes to the Consolidated Financial Statements
For the year ended March 31, 2015
(Expressed in Barbados dollars)
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25. Financial Risk Management…(continued)
25.1 Introduction...(continued)
The Groupʼs policy is that risk management processes are audited annually by the Internal Audit
function, which examines both the adequacy of the processes and the Groupʼs compliance with the
processes. Internal Audit discusses the results of all assessments with management, and reports its
findings and recommendations to the Supervisory and Finance Committees.
Risk mitigation
As part of its overall risk management, the Group invests a portion of its available funds in lending,
financial investments and non-earning assets. The Groupʼs main source of income is derived from
lending and it seeks to actively use collateral to reduce its credit risk. The Group also has sought long
term funding requirements to match their long term loan position.
In order to avoid excessive concentrations of risk, the Groupʼs policies and procedures include specific
guidelines to focus on maintaining a diversified portfolio.
25.2 Credit risk
Credit risk is the risk that the Group will incur a loss because its customers or counterparties fail to
discharge their contractual obligations. The Group manages and controls credit risk by setting limits on
the amount of risk it is willing to accept for individual counterparties and by monitoring exposures in
relation to such limits. Credit risk exposures arise principally in lending activities that lead to loans and
advances, and investment activities that bring debt securities into the Groupʼs asset portfolio. There is
also credit risk in off-balance sheet financial instruments, such as commitments.
Loans and advances
The Group employs a range of policies and practices to mitigate credit risk relating to loans and
advances. The most traditional of these is the taking of security for funds advanced. The principal
collateral types for loans and advances within the Group are:
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Mortgages over residential properties
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Charges over financial instruments such as debt securities and equities
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Charges over business assets such as premises
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Hypothecation of deposit balances
It is the Groupʼs policy to dispose of repossessed properties in an orderly fashion. The proceeds are
used to reduce or repay the outstanding claims. The Group does not occupy repossessed properties for
business use.
Financial investments
The Group limits its exposure to credit risk by investing only in entities that have high credit ratings and
Government of Barbados securities. Government securities are invested over a longer period than term
deposits with other financial institutions which typically mature within one year. The Group has invested
in available-for-sale equity instruments as well which gives it an opportunity to monitor the performance
of these companies over time and make economic decisions where warranted. The Group has
documented investment policies in place, which guide the management of credit risk on investments.
