33. FINANCIAL RISK MANAGEMENT CONTINUED  Market risk  (a) Foreign exchange risk  (b) Interest rate risk  The Group manages its exposure to interest rate fluctuation by continuously monitoring its debt to ensure any significant  movement would not have a material impact on the performance of the Group. The Group does not engage in any  significant transactions which are of a speculative nature.  At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:  Other than interest bearing liabilities, there are no other significant foreign currency exposures in relation to financial  instruments at year end.  As at 30 June 2010, a 10% strengthening of the Australian dollar against the USD and GBP would have increased equity  by $13.5 million (2009 $5.0 million) and $1.3 million (2009: $1.6 million) respectively. A 10% weakening of the Australian  dollar against the USD and GBP would have decreased equity by $16.5 million (2009 $6.1 million) and $1.6 million  (2009: $1.9 million) respectively. There would be no impact on profit and loss as the loans are designated as net  investment hedges.  The Group borrows funds in foreign currencies to hedge its net investments in foreign operations. The Group has loans  totalling $148.3 million (2009: $54.7 million) denominated in US dollars (USD) and $14.0 million (2009: $17.5 million)  denominated in sterling (GBP) which have been designated as hedges of the Group’s net investments in subsidiaries  with functional currencies in those currencies.  Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated  in a currency that is not the functional currency of the respective Group entities. The Group operates internationally and  is exposed to foreign exchange risk arising from the currency exposure to the Australian dollar. Consolidated  30 June 2009  Carrying  amount  Contractual  cash flows  $’000  Less than  1 year  1 – 5 years  Over 5  years  Non-derivative financial liabilities  Trade and other payables  58,543  58,543  58,543  -  -  Finance leases & hire purchase  6,168  7,456  2,975   4,481  -  Bank loans  78,884  79,067  6,919  72,148  -  Derivative financial liabilities  Forward exchange contract  236  236  236  -  -  143,831 145,302 68,673 76,629 - Consolidated 30 June 2010  30 June 2009  Effective  Interest  Rate  Balance  $’000  Effective  Interest  Rate  Balance  $’000  Variable rate instruments  Cash assets  3.10%  56,282 2.48%  65,808 Bank loans  2.72%  (169,769) 3.00%  (78,72 8) (113,487) (12,92 0) Fixed rate instruments  Finance leases & hire purchase  7.93%  (5,460) 8.49%  (6,168) Bank loans  8.00%  (11) 6.56%  (156) (5,471) (6,324) Page 61 of 80  Liquidity risk continued  Notes to the Consolidated Financial Statements  Cardno Limited and its Controlled Entities for the year ended 30 June 2010