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for the period ended 31 December 2015


Risk management (continued)

Credit risk

Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual

obligations on card, loan and other receivables, amounts owing from group companies and cash and cash equivalents. The risk on cash

and cash equivalents is managed through dealing with well-established financial institutions with high credit standing. The risk arising on

card, loan and other receivables is managed through a stringent policy on the granting of credit limits, continual review and monitoring of

these limits. The risk on amounts owing fromgroup companies aremanaged throughmonitoring the value of the amounts due and ensuring

regular settlement thereof.

The RCS Group does not consider there to be any significant concentration of credit risk in respect of which adequate impairment has not

been raised for the financial assets detailed below, in the credit risk exposure.

The RCS Group does not require collateral in respect of card and loan receivables.

The RCS Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of card

and loan receivables. The allowance is calculated using the internationally-recognised Markov model and other statistical

indicators. Management aims to maintain a certain level of non-performing loan coverage, which can be influenced by the

delinquency and underlying performance of the card and loan receivables. The Markov model uses delinquency roll rates on

customer balances to determine the inherent bad debt in a card and loan book. The board of directors believe that card and

loan receivables balances are being measured fairly.

Credit risk exposure

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position.

Themaximumexposure to credit risk at the reporting date was:

31 December 2015

31 March 2015



Cash and cash equivalents

551 918

446 787

Card and loan receivables

5 961 948

5 508 226

Other receivables

3 117

12 266

Amount receivable from insurer

94 850

94 919

Interest rate swaps

15 249

Amounts owing from group company


6 611 833

6 077 528

Liquidity risk

Liquidity risk is the risk that the RCS Group will not be able to meet its financial obligations as they fall due. The RCS Group’s

approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under

both normal and stressed conditions, without incurring unacceptable losses or risking damage to the RCS Group’s reputation.