Financial risk factors
Net Insight is exposed to various financial risks: market risk (including foreign currency risk, fair value interest risk, cash flow interest risk, and price risk), credit risk, and liquidity risk. Foreign currency risk is predominant and the Board assesses that Net Insight is primarily exposed to the following financial risks:
Foreign currency risk
Foreign currency risk is defined as the risk of decreased earnings and/or decreased monetary flows due to fluctuations in exchange rates.
Changes in exchange rates affect the group’s earnings and equity in different ways:
- Earnings are affected when sales and purchases are in different currencies (transaction exposure)
- Earnings are affected when assets and liabilities are in different currencies (translation exposure)
- Equity is affected when foreign subsidiaries’ net assets are translated into Swedish kronor (SEK) (translation exposure in the Balance Sheet).