91 Cloudberry Annual report 2020 Financial statements Note 9 Financial risks Interest rate risk Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s underlying assets will normally be loan-financed with long term debt obligations with floating rates, which is exposed to the risk of changes in market interest rates. An increase in interest rates will lead to higher financing costs, which reduces the Group’s profitability. Management wishes to minimize the interest rate risk together with borrowing costs. The Group manages the borrowing cost and interest risk by either using long-term financing at fixed rates or using floating to fixed interest swaps. See details under note 10 and 11, financial instruments and hedge accounting. Currency risk The Company presents its financial statements in NOK. However, all trades on Nord Pool, which is the market for trading of power in Norway and Sweden, are settled in Euro, exposing the Group to currency risk (electricity certificates are traded in SEK). Any fluctuations in exchange rates between NOK, SEK and Euro could materially and adversely affect the Group’s business, results of operations, cash flows, financial condition and/or prospects. Additionally, the Group has employees and oper- ations in Sweden, which also exposes the Group to currency risk. Any fluctuations in exchange rates between NOK and SEK could materially and adversely affect the Group’s business, results of operations, cash flows, financial condition and/or prospects. The Group may want to do business in other countries in the future, exposing the Group to additional currency risk. Should it choose to do so, any fluctuations in exchange rates between NOK and the relevant foreign currency could materially and adversely affect the Group’s business, results of operations, cash flows, financial condition and/or prospects. The Company does not currently have any currency hedging arrangements in place to limit the exposure to exchange rate fluctuations. Liquidity risk Liquidity risk is the risk that Cloudberry will not be able to meet its financial obligations when due. The Group manages liquidity risk through on a regular basis to review of future commitments and the liquidity reserves which consist of cash (see note 21) and borrowing facilities (see note 23). Management prepares minimum quarterly cash flow forecasts that look a minimum of twelve months ahead to han- dle the liquidity risk. When taking business decisions and entering into contracts Cloudberry evaluates the liquidity needs and makes sure the liquidity needed is in place before entering into contracts. As of 31 December 2020, the Group has a total of NOK 462 million in contractual commitments, in addi- tion to the current payables which are recognised in the Groups balance sheet. See note 24 Provisions, guarantees and other contractual obligations. Credit risk Credit risk is the risk that Cloudberry’s customers or counterparties will cause financial loss by failing to honour their obligations. The Group is exposed to third party credit risk in several instances includ- ing off-take partners who have committed to buy electricity produced by or on behalf of the Group, banks providing financing and guarantees of the obligations of other parties, insurance companies providing coverage against various risks applicable to the Group’s assets, and other third parties who may have obligations towards the Group. The Group’s main credit risks arise from credit exposures with deposits with financial institutions and other short-term receivables. Counterparties in derivative contracts and financial deposits are limited to financial institutions with high creditworthiness.