Kazia Therapeutics Annual Reports 2023

67 Kazia Theraputics Limited Annual Report 2023 Chairman and CEO’s Letter Key Milestones Introduction to Kazia’s CEO Pipeline Review Environment, Society and Governance Financial Reports Interest rate risk The consolidated entity’s exposure to market interest rates relate primarily to the investments of cash balances. The consolidated entity has cash reserves held primarily in Australian dollars and United States dollars and places funds on deposit with financial institutions for periods generally not exceeding three months. As at the reporting date, the consolidated entity had the following variable interest rate balances: 2023 2022 Weighted average interest rate Balance Weighted average interest rate Balance Consolidated % $ % $ Cash at bank and in hand 0.40% 5,241,197 - 7,361,112 Net exposure to cash flow interest rate risk 5,241,197 7,361,112 The consolidated entity has cash and cash equivalents totalling $5,241,197 (2022: $7,361,112). An official increase/decrease in interest rates of 100 basis points (2022: 100 basis points) would have a favourable/adverse effect on profit before tax and equity of $52,411 (2022: $73,611) per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The entity is not exposed to significant credit risk on receivables. The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the consolidated entity based on recent sales experience, historical collection rates and forward-looking information that is available. The consolidated entity places its cash deposits with high credit quality financial institutions and by policy, limits the amount of credit exposure to any single counter-party. The consolidated entity is averse to principal loss and ensures the safety and preservation of its invested funds by limiting default risk, market risk, and reinvestment risk. The consolidated entity mitigates default risk by constantly positioning its portfolio to respond appropriately to a significant reduction in a credit rating of any financial institution. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. There are no significant concentrations of credit risk within the consolidated entity. The credit risk on liquid funds is limited as the counter parties are banks with high credit ratings. Credit risk is managed by limiting the amount of credit exposure to any single counter-party for cash deposits. Liquidity risk The consolidated entity manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. In particular, contingent consideration may be satisfied either by payment of cash or by issue of shares, at the discretion of the entity. Note 23. Financial instruments continued