33. Risk management
Financial risk management
The entity’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
SAHPRA’s s risk management policies are established to identify and analyse the risks faced by SAHPRA to set appropriate risk limits and controls and to monitor risk and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in SAHPRA’s activities. SAHPRA, through its training and management standards and procedures, aims to develop a disciplined and effective control environment in which all employees understand their roles and obligations. The Audit and Risk Committee oversees how management monitors compliance with SAHPRA’s risk policies and procedures, and review the adequacy of the risk management framework in relation to the risk faced by the entity. The Audit and Risk Committee is assisted in its oversight role by the Internal Audit. The internal audit undertakes both regular and adhoc financial reviews of controls in place to mitigate the risk which are reported to the Risk, Audit and Governance Committee. There are no significant changes compared to the prior year.
Debtors are assessed at year end for recoverability and the necessary provision for write off will be raised if deemed material.
SAHPRA’s financial instruments consist mainly of cash and cash equivalents, receivable and payables. Bank deposits and balances, receivables and payables approximate their fair values due to the short-term nature of these instruments. The fair values together with the carrying amounts have been determined by using available market information and are presented in the statement of financial position.
Liquidity risk
The entity’s risk to liquidity is a result of the funds available to cover future commitments. The entity manages liquidity risk through an ongoing review of future commitments and credit facilities.
The table below analyses SAHPRA’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Maturity groupings | Later than one month | Later than one month and no three months | Later than one month and no three months | Later than one month and no later later than five | Total |
Trade payables from exchange transactions | – | 4 763 825 | – | – | 4 763 825 |
Revenue received in advance | – | – | – | 204 003 708 | 204 003 708 |
Provisions | – | – | 14 197 149 | – | 14 197 149 |
Operating lease payable | – | – | 3 259 196 | – | 3 259 196 |
Accrued expenditure | – | – | 6 673 294 | – | 6 673 294 |
Salary accruals | – | – | 1 584 383 | – | 1 584 383 |
Accrued thirteenth cheque | – | – | 2 251 260 | – | 2 251 260 |
Travel lodge card | 383 642 | – | – | – | 383 642 |
383 642 | 4 763 825 | 27 965 282 | 204 003 708 | 237 116 457 |
33. Risk management (continued)
Concentration of risk | ||||
Neither past due nor impaired | Past due but not impaired less than two months | Past due but not impaired more than two months | Carrying amount | |
Revenue received in advance | 204 003 708 | – | – | 204 003 708 |
Receivables from exchange and non-exchange transactions | – | – | 15 190 917 | 15 190 917 |
204 003 708 | – | 15 190 917 | 219 194 625 |
Credit risk
No credit limits were exceeded during the reporting period, and management does not expect any surplus (deficit) from non- performance by these counterparties.
Financial assets exposed to credit risk at year end were as follows:
Cash and cash equivalents | 244 373 304 | 150 764 296 |
Receivables from exchange and non-exchange transactions | 15 190 917 | 10 471 638 |
Market risk
Market risk is the risk that changes in the market prices such as interest rates, will affect SAHPRA’s income and value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, whilst optimising the return. SAHPRA’s is then exposed to one primary type of market risk, namely, interest rate risk.
Interest rate risk
As the entity has no significant interest-bearing assets, SAHPRA’s income and operating cash flows are substantially independent of changes in market interest rates.