Universal Music Group N.V. ANNUAL

Market Risk

Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by falling to discharge an obligation. UMG's maximum credit risk exposure is equal to the carrying amounts of Trade and other receivables, refer to Note 14, and Cash position and borrowings, refer to Note 16, as presented in the Statement of Financial Position. Also, for the derivatives and assets at fair value via profit and loss, the maximum exposure to credit risk at the end of the reporting period is equal to the carrying amount, refer to Note 18 . The maximum credit risk exposure on guarantees issued corresponds to their nominal amounts, as presented in Note 17 . UMG aims to centralize its cash management with its Tier 1 banks, of which all the banks have credit ratings of minimum of A-. UMG performs ongoing evaluations of the financial and non-financial condition of UMG customers and adjusts credit limits when appropriate. In instances where a customer's creditworthiness is determined not to be sufficient to grant the required credit limit, there are several mitigation tools that can be utilized to close the gap, including reducing payment terms, cash on delivery, prepayments and pledges on assets.