CNSREIT-AR-2024 Final - Flipbook - Page 112
Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a
derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative
contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the
credit risk in derivative instruments primarily by entering into transactions with high-quality counterparties.
Market risk is the risk of a change in interest rates having an adverse effect on the value of a financial instrument. The
market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the
types and degree of market risk that may be undertaken. With regard to variable rate financing, we will assess our interest
rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact
expected future cash flows and by evaluating hedging opportunities. We will maintain risk management control systems to
monitor interest rate cash flow risk attributable to both our outstanding and forecasted debt obligations as well as our
potential offsetting hedge positions. While this hedging strategy will be designed to minimize the impact on our net income
and funds from operations from changes in interest rates, the overall returns on your investment may be reduced.
As of December 31, 2024, we did not have any derivative contracts and therefore, there were no risks associated with
those instruments.
95
