Our world Search PLC | Investors Menu Financial Risks Financial risk management is carried out by a central treasury department under policies approved and delegated by the Board of Directors. The main financial risks faced by the Group relate to fluctuations in interest and foreign exchange rates, the risk of default by counterparties to financial transactions and the availability of funds to meet business needs. The management of these risks is set out below. Interest Rate Risk The Group’s policy is to target fixing a minimum of 50% of interest costs for senior unsecured debt of the Group excluding Tesco Bank. At 29 February 2020, the percentage of interest-bearing debt at fixed rates was 68% (2019: 78%). The weighted average rate of interest paid on senior unsecured debt this financial year, excluding joint ventures and associates, was 3.30% (2019: 3.76%). During 2019 and 2018, net debt was managed using derivative instruments to hedge interest rate risk. Credit Risk Credit risk is the risk that a counterparty will not meet its obligations leading to a financial loss for the Group. Credit risk arises from cash and cash equivalents, Trade and other receivables (excluding prepayments), Derivative financial instruments, Loans and advances to customers and banks, Financial assets at fair value through other comprehensive income and Short-term investments. For financial assets (other than Trade and other receivables), the Group holds positions with an approved list of investment-grade rated counterparties and monitors the exposure, credit rating, and outlook and credit default swap levels of these counterparties on a regular basis. Counterparty credit limits are reviewed on an annual basis, and may be updated throughout the financial year. The net counterparty exposure under derivative contracts is £1.0bn (2019: £1.0bn). The Group considers its maximum credit risk to be £15.6bn (2019: £19.7bn) largely based on the Group’s total financial assets. Liquidity Risk The Group finances its liquidity position and its operations by a combination of retained profits, disposals of assets, debt capital market issues, bank borrowings and leases. The policy is to maintain a prudent level of cash together with sufficient committed bank facilities to meet liquidity needs as they arise, to maintain a smooth debt profile and maturing senior unsecured debt will not exceed £1.5bn in any 12-month period. The Group retains access to capital markets so that maturing debt may be refinanced as it falls due. Liquidity risk is continuously monitored by short-term and long-term cash flow forecasts. In addition, the Group has the following undrawn committed facilities which mature in 2021. The undrawn committed facilities include £0.4bn (2019: £0.4bn) of bilateral facilities and a £2.6bn (2019: £2.6bn) syndicated revolving credit facility. The Group has a £15.0bn Euro Medium Term Note programme, of which £4bn was in issue at 29 February 2020 (2019: £4.2bn), plus £0.4bn equivalent of USD denominated notes issued under 144A documentation (2019: £0.4bn). The following is an analysis of the undiscounted contractual cash flows payable under financial liabilities and derivative liabilities taking into account contractual terms that provide the counterparty a choice of when (the earliest date) an amount is repaid by the Group. The potential cash outflow of £19.3bn is considered acceptable as it is offset by financial assets of £16.8bn (2019: £21.3bn offset by financial assets of £19.7bn). Foreign Exchange Risk The Group is exposed to foreign exchange risk principally via: transactional exposure that arises from the cost of future purchases of goods, where those purchases are denominated in a currency other than the functional currency of the purchasing company. Transactional currency exposures that could significantly impact the Group income statement are hedged. These exposures are hedged via forward foreign currency options, which are designated as cash flow hedges and the policy is to have minimum (20%) and maximum (80%) hedge level of forecast uncommitted exposure within the next 12 months. net investment exposure arises from changes in the value of net investments denominated in currencies other than Pounds Sterling. The Group's policy is to hedge a part of its investments in its international subsidiaries via foreign currency derivatives and borrowings in matching currencies, which are formally designated as net investment hedges. During the current financial year, currency movements decreased the net value, after the effects of hedging, of the Group’s overseas assets by £70m (2019: increase by £100m). The Group also ensures that each subsidiary is appropriately hedged in respect of its non-functional currency assets; and loans to non-UK subsidiaries in currencies other than in the Group's functional currency. The Group's policy is that 100% of the foreign exchange risk is hedged. The risk exposure is managed by the use of foreign currency derivatives and borrowings in matching currencies. These are not formally designated as hedges as gains and losses on hedges and hedged loans will naturally offset. 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