Sensitivity analysis to market risk – Companies are required to report both qualitatively and quantitatively on their risk management strategies and the internal metrics they use for the calculation and management of risk arising from financial instruments.
IFRS 7 breaks down the risk arising from financial instruments into three broad categories: market risk, credit risk and liquidity risk.
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the company’s income or the value of its financial instruments. Example disclosures are as follows:
Explanation Sensitivity analysis to market risk
Entities are required to disclose a sensitivity analysis to demonstrate the