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The concentration of the Group’s credit risk varies in relation to the nature of the activities of the individual sectors and the various markets in which they operate. That risk is mitigated, however, by the fact that the credit exposure is spread over a large number of counterparties and customers. Nevertheless, credit risk for the global portfolio, of trade receivables and receivables from financing activities, in particular dealer financing and finance leases, is concentrated in the European Union for the Fiat Group Automobiles and Trucks and Commercial Vehicles Sectors, and in North America for the Agricultural and Construction Equipment Sector.
Dealers and end-customers to whom credit is extended are subject to a specific evaluation of their creditworthiness using a detailed scoring system. Additionally, it is the Group’s practice to obtain financial and non-financial guarantees for credit granted for the purchase of cars, commercial vehicles and agricultural and construction equipment. These guarantees are further enhanced, where possible, by retaining title on vehicles sold to the sales network under finance or lease agreements.
Financial assets are recognised on the balance sheet net of any impairment for the risk that counterparties will fail to fulfil their contractual obligations, determined on the basis of the information available on the customer’s creditworthiness and historic data.