The council's overall risk management programme focuses on the unpredictability of financial markets, and seeks to minimise potential adverse effects on the resources available. Risk management is carried out by a central treasury team under policies approved by the full council in the annual treasury management strategy report. The procedures for risk management are set out through a legal framework underpinned by the Local Government Act 2003 and associated regulations. These require the council to comply with the CIPFA Prudential Code, the CIPFA Code of Practice on Treasury management in the Public Services and investment guidance issued through the Act. Overall, these procedures require the council to manage risk actively. The annual treasury management strategy for 2025/26, which incorporates the prudential indicators was approved by council on 04 March 2025 and is available on the council's website.
The council's activities expose it to a variety of financial risks. The key risks are:
Credit Risk – the possibility that other parties might fail to pay amounts due to the council
Liquidity Risk – the possibility that the council might not have funds available to meet its commitments to make payments
Re-financing Risk – the possibility that the council might be requiring to renew a financial instrument on maturity at disadvantageous interest rates or terms
Market Risk – the possibility that financial loss may arise for the council as a result of changes in such measures as interest rates and stock market movements.
Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the council's customers.
This risk is minimised through the Annual Investment Strategy, which is available on the council's website.
The council invests its cash balances on the basis of security first and returns second. As part of this prudent approach officers keep a daily watch on the council's investments, drawing upon the advice of experts whilst remaining cognisant of emerging economic themes that may pose risks from other sources including the financial press. This includes subscribing to the creditworthiness service provided by Link Asset Services.
The council's credit risk management practices are set out in the Annual Investment Strategy, with particular regard to determining whether the credit risk of financial instruments has increased significantly since initial recognition.
The Annual Investment Strategy requires that deposits are not made with financial institutions unless they meet identified minimum credit criteria, in accordance with either Fitch, Moody's and Standard & Poors Credit Ratings Services. The Annual Investment Strategy also considers maximum amounts and durations with a financial institution located in each category.