As part of the Company’s sustainability efforts, a more comprehensive and systematic assessment of all financial and non-financial risks - along with traditional business risks such as security, product safety, supply chain, as well as occupational health and safety - is targeted.
In the past, risks were managed by individual departments; however, in line with the changes in the overall risk management concept, risks are now tackled as a whole and assessed on an institutional basis. At companies that adopt the principles of Corporate Risk Management, a risk committee ensures effective risk management as imposed by the Board of Directors, and thus risks can be properly measured.
Capital Risk Management
The Company manages its capital to ensure the continuity of its operations while maximizing its profits through the optimization of the debt and equity balance.
The capital structure of the Company consists of debt, which includes the loans disclosed in Note 6, non-commercial payables to parties not related to the Group disclosed in Note 8, other receivables from related parties, and other payables to related parties disclosed in Note 27, cash and cash equivalents disclosed in Note 5 and equity items composed of capital and reserves as disclosed in Note 20 of the audit report which includes the financial statements and footnotes.
For each period, the senior management regularly reviews capital based on the leverage ratio to be consistent with other companies in the industry. This ratio is calculated by dividing net debt into total capital. Net debt is calculated by deducting cash and cash equivalents from total debt amount (total debt consists of short- and long-term borrowing, the total receivable/payable balance between the Group companies and the Company, and the total of financial debts to parties outside the Group). As shown in the consolidated financial statements, the total capital is calculated by adding equity and net debt.
Credit Risk Management
Credit risk refers to the risk that a counterparty of a financial instrument will default on its contractual obligations resulting in a financial loss to the Company.
The majority of the receivables due from sales consist of credit card slip receivables. Since the customers are final consumers, the Company has no credit risk for credit card slip receivables. The risk arising from the advances and deposits given in order to make investments by the Company is kept under control by obtaining letters of guarantee from various banks. Based on internal procedures, the Company does not pay any advance or deposit without obtaining a letter of guarantee from banks.
Liquidity Risk Management
The Company manages liquidity risk by maintaining adequate reserves, banking facilities, and reserve borrowing facilities by continuously monitoring projected and actual cash flows and matching the maturity profiles of financial assets and liabilities.
Market Risk Management
Although to a very limited extent, the Company’s field of activity is subject to financial risks arising from changes in foreign currency exchange rates. Market risk exposures of the Group are measured using sensitivity analysis. In the current period, there has been no significant change to the Company’s exposure to market risks or the manner in which it manages and measures the risks with respect to the previous period.
Foreign Currency Risk Management
Transactions denominated in foreign currency expose the Company to foreign currency risk. The Company does not use any derivative financial instrument to preserve its foreign currency risk as a result of Company operations and cash flows under financial agreements.
The Company is not subject to interest rate risk, as the Group does not have any floating rate liability. The Company has no investment or liability that may expose it to share and/or bond price fluctuations.