quoted market prices. Given the nature of the Group’s accounts receivable trade items, the carrying value is considered as equivalent to the fair value. 5.2.1 Market Risk The Group’s activities primarily expose it to the financial risks of changes in foreign currency exchange rates, interest rates and commodity prices. The Group enters into a number of derivative financial instruments to manage its exposure to foreign currency risk and interest rate risk, including: – Currency derivatives, mainly forward foreign exchange contracts, to hedge the exchange rate risk arising from recorded transactions; and – Interest rate swaps and other instruments to mitigate the risk of interest rate increases and/or to optimally manage interest rate costs depending on the prevailing interest rate environment. Market risk exposures are measured using sensitivity analysis. There has been no change during the year in the structure of the Group’s exposure to market risks or the manner in which these risks are managed. 5.2.1.1 Foreign Exchange Risk The Group operates across the world and is exposed to movements in foreign currencies affecting its net income and financial position. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities, and net investments in foreign operations. It is the Group’s policy to enter into derivative transactions to hedge current and forecasted foreign currency transactions, and translation risk arising from certain investments in foreign operations with a functional currency different from the Group’s presentation currency. In 2018 the Group applied hedge accounting on the net investment in foreign currency in Naturex SA with the aim of being protected from the foreign currency risk on the translation of the investment in Naturex (i.e. EUR) into the Group’s presentation currency (i.e. CHF). In total EUR 1,292 million of Euro straight bonds were designated as hedging instruments, corresponding to the net investment in Naturex. This resulted in a gain of CHF 57 million (2020: gain of CHF 7 million), recognised in currency translation differences in equity in 2021. In 2020 and 2021 the Group applied hedge accounting on the foreign currency risk related to the Euro straight bond coupons, and to the acquisitions of the cosmetic business of Indena in 2020. In 2020 the Group also applied hedge accounting on the net investment in foreign currency in Ungerer with the aim of being protected from the foreign currency risk on the translation of the investment in Ungerer (i.e. USD) into the Group’s presentation currency (i.e. CHF). The combination of a Eurobond and several cross-currency swaps as one single item are designated as a hedging instrument for a total of USD 544 million corresponding to the foreign currency principal cash flow of the cross-currency swap. In 2021 it resulted in a loss of CHF  15  million (2020: gain of CHF 51 million) recognised in currency translation differences in equity. The cross-currency swaps designated in the above mentioned hedging relationship have the following characteristics: Entity Issue date Type of instrument Notional amount in millions of EUR Notional amount in millions of USD Annual USD fixed interest rate (payment) Annual EUR fixed interest rate (receipt) Starting date Maturity date Givaudan SA 2020 Cross- currency swaps 80 87.3 2.218% 1% 22 Apr 2020 22 Apr 2027 100 108.8 2.166% 80 86.9 2.167% 80 8 7. 0 2.166% 90 9 7. 9 2.133% 70 76.2 2.126% Furthermore, Group Treasury centrally manages foreign exchange risk management activities against the functional currency of each subsidiary, and is required to hedge, whenever cost- effective, their largest exposures. The measurement of the foreign currency risk expresses the total exposure by currency, which is in the opinion of Group Treasury a representative manner to monitor the risk. It measures the cumulative foreign exchange risk of all subsidiaries of recognised assets and liabilities that are denominated in a currency (e.g. USD) that is not the subsidiary’s functional currency (e.g. other than USD). 60 Givaudan — 2021 Governance, Compensation and Financial Report Governance Report Compensation Report Consolidated Financial Report Statutory Financial Report Appendix Notes to the consolidated financial statements