106 Dialog Semiconductor Plc | Annual report and accounts 2012  |  Section 4 | Consolidated financial statements and notes Notes to the consolidated financial statements 25. Financial risk management objects and policies continued For the year ended 31 December 2012  Loans and receivables (LaR) and deposits  designated as cash fow hedges $^{1)}$  Financial liabilities at amortised cost (FLAC)  1) Increase/decrease  against US$ Effect on profit US$000 Effect on equity US$000 Effect on profit  US$000  Effect on equity US$000 2012  Euro  1.9% 178 279 (134) (134) Pound Sterling  4.6% 42 42 (148) (148) Euro  (1.9)% (178) (279) 134  134 Pound Sterling  (4.6)% (42) (42) 148  148 2011  Euro  3.4% 300 374 (33) (33) Pound Sterling  0.5% 8 8 (5) (5) Euro  (3.4)% (300) (374) 33  33 Pound Sterling  (0.5)% (8) (8) 5  5 At 31 December 2012, the Group had cash and cash equivalents of US$312,435,000 (2011: US$113,590,000).  The Group uses quarterly cash flow forecasts to monitor its liquidity risk. It takes financial investments and financial assets (e.g. trade accounts receivable  and other financial assets) into consideration, as well as projected cash flows from operations. The Group’s objective is to minimise interest expense by  avoiding the use of short-term bank liabilities or bank overdrafts within the Group.  The Group’s exposure to credit risk arising from other financial assets of the Group, which comprise cash, cash equivalents and restricted, would arise  from default by counterparty.  In order to finance its growth the Group entered into two factoring agreements with reputable financial institutions. The maximum amount of cash that  can be received under these agreements is US$60,000,000 (2011: US$42,000,000). The agreements, which comprise receivables from selective  customers, significantly reduce the underlying credit risk because the financial institutions assume all credit risks associated with the collection of the  receivables financed under the programmes.  The Group is exposed to credit risk from its operating activities and certain financing activities. The Group trades only with recognised, creditworthy third  parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable  balances are monitored on an on-going basis, with the result that the Group’s exposure to bad debts is not significant. Regarding the risk concentration  please see above, “vulnerability due to certain significant considerations”.  A risk analysis for the Group’s securities was done separately, based on the inherent historic volatility of the specific securities, see below.  [1] Categories according to IAS 39  Liquidity risk  Credit risk 