MCCU Annual Report - page 79

79
31. Financial Instruments and Financial Instruments Risk Management:
a) Credit Risk
MANCHESTER CO-OPERATIVE CREDIT UNION (1977) LIMITED
NOTES TO THE FINANCIAL STATEMENTS - (CONT'D)
YEAR ENDED 31ST DECEMBER 2013
The Board of Directors has overall responsibility for the establishment and oversight of the Credit
Union’s
risk
management framework. The Credit
Union’s
risk management policies are established to identify and analyse the risks
faced by the Credit Union, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The
Board through its various committees is responsible for monitoring compliance with the Credit
Union’s
risk management
policies and procedures, and for reviewing the adequacy of the risk management framework in relation to the risks faced
by the Credit Union. All committees report monthly to the Board on their activities.
The Supervisory Committee is directly responsible for monitoring compliance with the Credit
Union’s
risk management
policies and procedures and for reviewing the adequacy of the risk management framework in relation to the risks faced
by the Credit Union. The Supervisory Committee is assisted in these functions by the Internal Audit Department which
undertakes periodic reviews of risk management controls and procedures, the results of which are reported to the
Supervisory Committee.
A financial instrument is a contract that gives rise to both a financial asset of one enterprise and a financial liability or
equity instrument of another enterprise. For the purpose of the financial statements, financial assets have been
determined to include investments, cash and cash equivalents and receivables. Financial liabilities have been determined
to be saving deposits, external credits, payables and accruals.
The Credit Union is exposed to credit risk, liquidity risk, market risk and operational risk from its use of financial
instruments. Market risk includes interest rate risk and currency risk.
Credit risk is the risk that a party to a financial instrument will fail to discharge an obligation and cause the other
party to incur a financial loss. This risk arises primarily from the Credit Union's loans to members, deposits with
other institutions and investment securities. There is also credit risk exposure in respect of "off-balance sheet"
financial instruments such as loan commitments and guarantees. These expose the Credit Union to similar risks as
loans and are managed in the same manner.
MANCHESTER CO-OPERATIVE CREDIT UNION
ANNUAL REPORT 2013
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