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ENAV Group Consolidated Financial Statements

37. Risk management

Credit risk
The Group is exposed to credit risk, which essentially refers to the risk of one or more
trading partners being unable to fulfil a portion or all of its payment obligations. This
risk mainly refers to current trade receivables relating to operations, and specifically
regarding the En-Route Services and Terminal Services, which represent the highest
exposure in the balance sheet.These amounts basically refer to receivables accrued in
respect of airline companies relating to Charges, and in respect of which Eurocontrol
acts as a management and collection agent. Irrespective of the intermediary role
played by Eurocontrol, in this context that results in the receivables being formally
recognised in the financial statements and invoiced to Eurocontrol, the assessment
regarding the effective credit risk that the Group is exposed to, is done in relation
to the counterparty’s risk regarding each individual carrier that has accrued an
underlying debt. This because Eurocontrol does not assume any credit risk in relation
to the possible insolvency of carriers and pays its liabilities to the Parent Company
only once it has received the respective amounts from the airlines. Eurocontrol is
proactive in recovering these monies, and initiates the relative legal actions where
necessary.
A specific bad debts allowance has been made by the Group to meet the risk of non-
payment by the Group’s debtors. The process followed by ENAV for writing down
receivables consists of making write-downs of individual customer balances that
depend on the financial situation of the carrier concerned, the possible withdrawal
of the carrier’s flight licence, the age of the receivable, the in-house assessment
relating to the individual debtor’s credit capacity, as well as information provided by
Eurocontrol for en-route and terminal receivables. The amounts referring to doubtful
recoveries are recorded in the balance sheet in the appropriate bad debts allowance.
At 31 December 2015, this amount stood at € 51,872 thousand. The extent of the
provision is reviewed on a periodic basis to ensure that it is constantly updated in
relation to the perceived credit risk. At 31 December 2015, the doubtful recoveries
on trade receivables were fully covered by the bad debt allowance recorded in the
financial statements.

Liquidity risk
Liquidity risk refers to the risk that the Group, while being solvent, could find itself
in a situation where it is unable to promptly meet the obligations related to its
foreseeable or unexpected financial liabilities, resulting in difficulties in procuring
financial resources, or being able to secure these resources at unfavourable conditions
due to factors related to the perception of its risk on the market, or due to systematic
crisis situations, such as for example, a credit crunch and sovereign debt crisis, or
being unable to fulfil the covenants assumed under financing contracts and bonds.
The Group’s liquidity, even though it is not based on a centralised treasury system
(i.e. cash pooling), it is managed and monitored by the Parent Company at central
level in order to optimise the complex availability of financial resources, and carry
out a management and coordination function for the other companies in the Group.

146 ENAV - Annual financial report 2015