Home' Slater and Gordon Annual Report : Slater and Gordon AR 2016 Contents Notes to the Financial Statements
For the Year Ended 30 June 2016
Slater and Gordon Limited
5.4.4 Credit Risk (continued)
Credit Risk – Slater Gordon Solutions (Motor Services)
Debts are almost exclusively due from insurance companies. The capitalisation of insurers is regulated by the Financial
Conduct Authority in the UK. The insurance industry operates a policyholders’ protection scheme to alleviate the impact
of the failure of an insurance company.
Credit risk is therefore spread across major UK based motor insurers in proportion to their respective share of the
market. No credit insurance is taken out given the regulated nature of these entities.
No interest is charged on the receivables balances, however late penalty payments become payable at certain dates
under the Association of British Insurers’ General Terms of Agreement. SGS does not hold any collateral over these
balances nor has the legal right of offset with any amounts owed by SGS to the receivables counterparty.
There is also credit risk associated with unrendered disbursements and trade receivables. Once client matters are billed,
a significant portion of receivables related to the personal injuries business are considered low risk. This is because
these receivables are collected directly from settlements paid by insurers into trust funds held on behalf of the Group’s
clients. For the non-personal injury law business, the Group is exposed to the credit risk associated with the client’s
ability to meet their obligations under the fee and retainer agreement. The Group minimises the concentration of this
credit risk by undertaking transactions with a large number of clients.
Management of Credit Risk
The Group actively manages its credit risk by:
• assessing the capability of a client to meet its obligations under the fee and retainer agreement;
• periodically reviewing the reasons for bad debt write-offs in order to improve the future decision making process;
• maintaining an adequate provision against the future recovery of debtors and disbursements;
• including in practitioner’s Key Performance Indicators (“KPI’s”) measurements in respect of debtor levels, recovery
and investment in disbursements;
• providing ongoing training to staff in the management of their personal and practice group debtor portfolios; and
• where necessary, pursuing the recovery of debts owed to the Group through external mercantile agents and the
Due to the nature of the “No Win No Fee” arrangements applicable to the majority of the legal matters managed by the
Group an increase in the required processing time between initiation and settlement and an increase in the ageing of
receivables, particularly disbursements, does not always increase the associated credit risk.
Management performs periodic assessment of the recoverability of receivables, and provisions are calculated based on
historical write-offs of the receivables as well as any known circumstances relating to the matters in progress.
5.4.5 Liquidity Risk
The Group’s objective is to maintain a balance between the continuity of funding and flexibility through the use of
operating cash flows and committed available credit facilities. The Group actively reviews its funding position to ensure
the available facilities are adequate to meet its current and anticipated needs.
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate borrowing facilities are
maintained. Refer to the statement of cash flows and Note 3.3 Cash Flow Information, for further information on the
historical cash flows. Further information in relation to bank facilities available and utilised are outlined in Note 5.2
KPIs are set for practitioners relating to budgeted fee events, which are closely monitored by senior management.
The table below represents the estimated and undiscounted contractual settlement terms for financial instruments and
management’s expectation for settlement of undiscounted maturities.
80 Slater and Gordon Limited
Annual Report 2016
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