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30

Risk analysis and control affects all Group businesses and activities and also involves all

organisational units. It is therefore a corporate risk management and control system in which the

entire organisation actively participates and which is managed and overseen by the Board of

Directors, with the functions that are granted in this regard to the Audit Committee and the

coordination and participation of the Regulatory Compliance Committee and, in particular, the

Legal area in risk management and compliance controls, the Finance area in relation to financial

risks and the set of controls that compose the System of Internal Control over Financial Reporting

and, lastly, the Internal Audit and Process Control area in the coordination and supervision of the

overall functioning of the risk management system.

The Company and its Group have the tools and the organisation necessary to ensure the

effectiveness of the approved control procedures.

The Company's financial risk management is centralised in its Financial Department, which has

established the mechanisms required to control exposure to interest rate and exchange rate

fluctuations and credit and liquidity risk. The main financial risks affecting the Company are as

follows:

a) Credit risk:

In general, the Company holds its cash and cash equivalents at banks with high credit ratings.

The advertising contracting terms enable bank guarantees to be demanded prior to the launch of

advertising campaigns. Also, it should be noted that the Company does not have a significant

concentration of credit risk exposure to third parties and no significant incidents arose in 2015.

At 31 December 2015, 1.29% of total borrowings were past-due.

In any case, the Company estimates allowances for doubtful debts based on the age of the debt.

Allowances for doubtful debts amounted to EUR 4,706 thousand at 31 December 2015 (31

December 2014: EUR 2,601 thousand) (see Note 18.4).

b) Liquidity risk:

The Company’s liquidity policy is to arrange credit lines and current financial assets that are

sufficient to support its financial needs, on the basis of expected business performance. These are

all tied to floating interest rates.

The Company, for the purpose of ensuring liquidity and enabling it to meet all the payment

obligations arising from its business activities, has the cash and cash equivalents disclosed in its

balance sheet, together with the credit and financing facilities detailed in Note 14.

c) Foreign currency risk:

Foreign currency risk relates mainly to the payments to be made in international markets to

acquire broadcasting rights, primarily from major production companies in the US, denominated in

US dollars. In order to mitigate this risk, the Company arranges financial instruments (mainly

foreign currency hedges) which reduce exchange differences on foreign currency transactions (see

Note 10).

d) Interest rate risk:

Both the Company's cash and its bank borrowings are exposed to interest rate risk, which could

have an adverse effect on financial profit or loss and cash flows. The Company's financing is

arranged at interest rates tied to Euribor. To mitigate this risk, the Company has arranged interest

rate swaps to reduce the finance costs arising from the pegging to floating rates (see Note 10).