Strategic Report Strategic Report Strategic Report Financial Additional Overview Strategy Performance Governance Statements Information 27. Risk Management continued Market risk Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchanges, and equity prices. The Group classifies exposures to market risk into either trading or non-trading portfolios. Trading and non-trading positions are managed and monitored using sensitivity analysis. Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, on the Group’s consolidated income statement. The sensitivity of the consolidated income statement is the effect of the assumed changes in interest rates on the net interest income for the year, based on the floating rate non-trading financial assets and financial liabilities held at 31 December 2018. Changes in basis points are calculated as standard deviations of daily changes in floating rates over the last month multiplied by respective floating rates. During the years ended 31 December 2018, 2017 and 2016 sensitivity analysis did not reveal any significant potential effect on the Group’s equity. Sensitivity of other Increase Sensitivity of net comprehensive in basis points interest income income Currency 2018 2018 2018 GEL 6 251 1,019 EUR (1) (50) (2) US$ 6 121 63 Sensitivity of other Decrease Sensitivity of net comprehensive in basis points interest income income Currency 2018 2018 2018 GEL 6 (251) (1,019) EUR (1) 50 2 US$ 6 (121) (63) Sensitivity of other Increase Sensitivity of net comprehensive in basis points interest income income Currency 2017 2017 2017 GEL 13 443 (1,159) EUR 1 22 – US$ 3 (73) – Sensitivity of other Decrease Sensitivity of net comprehensive in basis points interest income income Currency 2017 2017 2017 GEL 13 (443) 1,159 EUR 1 (22) – US$ 3 73 – Annual Report 2018Bank of Georgia Group PLC 267