Risk Management

The group's activities expose it to a variety of risks including financial (market, credit, liquidity capital, etc), business (operational, technological, legal, health and safety, reputation, etc) and other forms of internal and external risks.

Overall risk management process is the responsibility of the board which it delegates to the audit and risk committee. Risks by their nature are unpredictable and require constant monitoring with processes that ensure that the group's exposure to such risk is limited to a bear minimum.

Financial risk management

The group operates internationally and as a result is exposed to foreign exchange risks arising from currency fluctuations, especially the US Dollar. The group buys the majority of light fixtures, lamp and electrical accessories in US Dollars. Entities within the group use forward exchange contracts where needed to manage their foreign exchange risk arising from transactions already recognised in the assets and liabilities. In general, the policy is not to enter into forward exchange contracts but do it in cases as and when required by the business and these are limited to orders placed with the suppliers.

The group is also exposed to price risk with regard to the price of copper. Copper price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in the price of copper. The copper price is determined in US Dollars on the London metal exchange which exposes the group to the risk that fluctuations in the South African Rand/US Dollar exchange rates may also have on current or future earnings. The group is not exposed to equity securities price risk.

Potential concentrations of credit risk consist primarily of cash investments and trade receivables. Trade receivables consist of a large number of customers spread across diverse industries and geographical areas. The group has policies in place to ensure that sales are made to customers with an appropriate credit history and in most instances, utilises credit insurance. The ongoing creditworthiness of the trade receivables is assessed from time to time. The group limits its exposure arising from the money market by dealing with well established financial institutions of high standing.

The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained. Due to the dynamic nature of the underlying business, the group aims to maintain flexibility in funding by keeping committed credit lines available.

The group's objectives when managing capital are to safeguard the group's ability to continue as a going concern in order to provide for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The executive directors are involved in the daily operations of the group, and the necessary decisions regarding capital risk management are made as and when necessary.