Investor Presentaiton
Novo Nordisk Annual Report 2023
Introducing Novo Nordisk
Strategic Aspirations
Risks
Management
Consolidated statements
Additional information
69
69
Specification of Other reserves
4.4 Financial risks
Key currencies
Exchange
rate
Tax and
USD
CNY
CAD
JPY
GBP
DKK million
2021
adjustments
Cash flow
hedges¹
other
Management has assessed the following key financial risks:
Average exchange rate applied (DKK per 100)
items
Total
Туре
Financial risk
2023
689
97
511
4.91
857
Foreign exchange risk
High
2022
708
105
543
5.40
873
Reserve at the beginning
of the year
Credit risk
Low
2021
629
97
502
5.73
865
(2,528)
1,802
(185)
(911)
Other comprehensive income, net
Transferred to intangible assets
1,624
(3,557)
1,117
(816)
Interest rate risk
Low
Year-end exchange rate applied (DKK per 100)
15
(2)
13
Liquidity risk
Low
2023
674
95
509
4.77
858
Reserve at the end of the year
2022
2022
697
101
515
5.29
838
(904)
(1,740)
930
(1,714)
2021
657
103
517
5.70
885
Other comprehensive income, net
Reserve at the end of the year
2,289
2,766
1,385
1,026
(892)
38
4,163
2,449
2023
Other comprehensive income, net
(1,404)
586
Reserve at the end of the year
(19)
1,612
(355)
(317)
(1,173)
1,276
1. For information on derivatives refer to note 4.5.
USD
Sensitivity on operating profit of an immediate 5% decrease in key currencies¹
DKK million
CNY
CAD
JPY
GBP
2024
(5,700)
(500)
(530)
(210)
(150)
2023
(3,180)
(500)
(320)
(240)
(160)
According to Danish corporate law, reserves available for distribution as dividends are
based on the financial statements of the parent company, Novo Nordisk A/S. Dividends
are declared and paid from distributable reserves. As of 31 December 2023,
distributable reserves total DKK 78,779 million (DKK 63,136 million in 2022),
corresponding to the parent company's retained earnings and Reserve for cash flow
hedges and exchange rate adjustments.
Novo Nordisk has centralised management of the Group's financial risks. The overall
objectives and policies for the company's financial risk management are outlined in
the internal Treasury Policy, which is approved by the Board of Directors. The Treasury
Policy consists of the Foreign Exchange Policy, the Investment Policy, the Financing
Policy and the Policy regarding Credit Risk on Financial Counterparts, and includes a
description of permitted use of financial instruments and risk limits.
Novo Nordisk only hedges commercial exposures and consequently does not enter
into derivative transactions for trading or speculative purposes. Novo Nordisk uses a
fully integrated treasury management system to manage all financial positions, and
all positions are marked-to-market.
Foreign exchange risk
Foreign exchange risk is the most important financial risk for Novo Nordisk and
can have a significant impact on the income statement, statement of comprehensive
income, balance sheet and cash flow statement. The majority of Novo Nordisk's sales
are in USD, EUR, CNY, CAD, JPY and GBP. The foreign exchange risk is most significant
in USD, CNY and CAD, while the EUR exchange rate risk is regarded as low because of
Denmark's fixed exchange rate policy towards EUR. The overall objective of foreign
exchange risk management is to reduce the short-term negative impact of exchange
rate fluctuations on earnings and cash flow, thereby contributing to the predictability
of the financial results. Novo Nordisk hedges existing assets and liabilities in key
currencies as well as future expected cash flows up to a maximum of 24 months forward.
Hedge accounting is applied to match the impact of the hedged item and the hedging
instrument in the consolidated income statement. The currency hedging strategy
balances risk reduction and cost of hedging by use of foreign exchange forwards
and foreign exchange options matching the due dates of the hedged items. Expected
cash flows are continually assessed using historical inflows, budgets and monthly
sales forecasts.
Hedge effectiveness is assessed on a regular basis. Management has chosen to
classify the result of hedging activities as part of financial items.
Foreign exchange rate sensitivity analysis
At year-end, an immediate 5% decrease in the disclosed currencies versus DKK and
EUR is estimated by Management to have the following impact on Novo Nordisk's
operating profit for the next 12 months..
1. An immediate 5% increase would have the opposite impact of the above.
As per the end of 2023, a positive market value of financial contracts related to
hedging of foreign exchange risk of DKK 1,612 million had been deferred for
recognition in 2024 (in 2022 a positive market value of DKK 1,026 million was deferred
for recognition in 2023).View entire presentation