BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | NON-CONSOLIDATED ANNUAL REPORT 2020 66 BARBADOS PUBLIC WORKERS' CO-OPERATIVE CREDIT UNION LIMITED Notes to the Non-consolidated Financial Statements For the year ended March 31, 2020 (Expressed in Barbados dollars) 49 23. Financial Risk Management, continued Introduction, continued Risk mitigation As part of its overall risk management, the Credit Union invests a portion of its available funds in lending, financial investments and non-earning assets. The Credit Union’s main source of income is derived from lending and it seeks to actively use collateral to reduce its credit risk. The Credit Union also has sought long term funding requirements to match its long term loan positions. In order to avoid excessive concentrations of risk, the Credit Union’s policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Impact of COVID-19 The Coronavirus now renamed COVID-19 which originated in Wuhan China is now a world-wide pandemic and so far had a crippling effect on the global economy. Its impact on global tourism led reduced incoming flights to Barbados and a decline in business activity of hotels, restaurants and other ancillary sectors. This resulted in a surge of unemployment claims of over 33,000 between the period March and June 2020. As a consequence of job cuts and reduced disposable income, which would reduce persons’ ability to service their loan commitments and other obligation, management has adopted several measures specifically around financial risk management. These measures include: i. The Finance, Investment and Asset Management Committee meets monthly to discuss strategies and plans around managing the liquidity and the capital needs of the Credit Union. ii. Robust stress testing of our liquidity buffer at levels above regulatory requirements: • Assessing the monthly inflow and outflow of funds (liquidity forecasting); • Identifying and assessing the adequacy of contingency liquidity funding for our subsidiaries; • Revisiting measures geared at strengthening the Credit Union’s capital base; and the monitoring of portfolio behavioural matrices in reference to member servicing their loans iii. The implementation of measures to assist our members during this crisis, such as: • Loan moratoriums - It is not expected that there will be reclassification of loans from Stage 1 to Stage 2, as these payment moratoriums should not trigger a significant increase in the credit risk (SICR) unless other criteria indicating SICR are identified. • Special payment arrangementssuch as payment plan solutions and debt restructuring, based on approval by the Credit Committee and the Board.
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