Management's Discussion and Analysis (cont’d) 8.2 PROCUREMENT 8. RISk MANAGEMENT 8.1 BOARD ACCOUNTABILITy The preparation of our consolidated financial statements  requires management to make certain estimates and  assumptions. The estimates and assumptions are based on  our experience combined with management’s understanding  of facts and circumstances at the time. These estimates  may differ from actual results, and certain estimates are  considered critical as they are both important to reflect the  Company’s financial position and results of operations and  require a significant or complex judgment on the part of management. The following is a summary of certain accounting estimates or policies considered critical by management. Senior management accountability: Board oversight accountability:  Audit Committee Paul Snow, Vice President Procurement We are dependent upon the procurement of frozen raw  seafood materials and finished goods on world markets. The Canadian operation buys as much as $200 million and  the U.S. operation, including Viking and Icelandic USA, buys  as much as $400 million of these products annually. Prices  can fluctuate and there is no formal commercial mechanism  for hedging either sales or purchases. Purchases of seafood  on global markets are principally in U.S. dollars. We hedge  exposures to currency changes, and we enter into longer- term supply contracts when possible. All foreign currency  hedging activities are carried out in accordance with our  formal  Price Risk Management Policy , under the oversight of the  Audit Committee.  Our strategy is to always have at least two suppliers of  seafood products when we can. A very small percentage of  our supply is single sourced. A strong Canadian dollar offsets increases in the U.S. dollar  cost of raw materials for our Canadian operations, and  conversely when the dollar weakens, it increases our costs. High Liner has a strategic approach to risk management. To achieve a superior return on investment, we have designed an enterprise-wide approach, from the top down, to ensure we can identify, prioritize, and manage risk  effectively and consistently across the organization. The Board of Directors oversees risk management at High Liner, and has delegated to the Audit Committee the  task of providing reasonable assurance that we appropriately  identify and manage risks. The Audit Committee reviews at  least annually the Company’s Business Risk Management  policies, including the  Price Risk Management Policy , and  reviews and approves the disclosure of risk factors in this  MD&A and in other public documents issued by High Liner. Price and financial risks are reviewed at each Audit Committee meeting, including the Company’s Credit  Policy and exposures. The Audit Committee also annually  reviews the Company’s insurance program. We have identified nine principal risks that could have a  significant, adverse impact on our performance, reputation  or ability to service our customers and have, in the absence  of controls, a reasonable probability of occurring. Every  principal risk is assigned to at least one member of our senior  management team or to a board or management committee  who has reporting, oversight, and operational accountability  for the risk. These risks are regularly reviewed by our senior  management team, and by one or more internal committees  or Board committees, which have governance and oversight  accountability for the risk. This commentary is from a high- level perspective on the nature of each risk and describes  the main practices in place to manage these risks. Additional  discussion of some of these risks is included in our 2011  Annual Information Form, available at www.highlinerfoods. com or at www.sedar.com. We sometimes pay for finished goods upon shipment from  Asia, or we acquire seafood raw material and negotiate  processing arrangements with suppliers to convert that  raw material into our finished goods or raw material for our  North American plants. In some instances, this means the  outlay of cash for inventory is 90 days or more. We are doing  this to ensure we receive the seafood we require and are  receiving better prices from suppliers as a result. Although  As we purchase all seafood that we sell, we have developed  close relationships with key suppliers. We currently purchase  significant quantities of frozen raw material and finished  goods originating from all over the world. Our supplier base  is diverse to ensure no over-reliance on any source. We also  maintain strict  Supplier Approval and Audit Standards . Through  audit procedures, all food suppliers are required to meet  our quality control and safety standards, which, in many  instances, are higher than regulatory standards. All raw  materials are inspected, to assure consumers that High Liner  quality is consistent, regardless of source or origin. After substantial seafood cost increases in 2008, we saw  cost decreases in late 2009 for most of the fish species we  procured. The cost decreases reached their low point in 2009  and we continued to experience lower costs in the first half  of 2010 due to contracts we had in place that were in effect  for part of 2010 and as a result of low cost inventory we  had on hand at the end of 2009. In 2011, we saw a trend for  increasing cost during the year and into 2012. We expect 1  to  have higher average seafood costs in 2012 than in 2011. See  section 8.4 below for a more extensive discussion on the  impact of foreign exchange on our operating results. 43 ANNUAL REPORT 2011