THE CONTRIBUTORY PENSION PLAN FUND FOR EMPLOYEES OF TRANSIT WINDSOR

(Registration Number 353821)

Notes to Financial Statements (continued)
(in thousands of dollars unless otherwise stated)

Year ended December 31. 2019 

9. Financial instruments (continued): 

(b) Associated risks (continued):

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations as they fall due. The Plan maintains an investment policy, as approved by the Administrator, which contains asset mix guidelines which assist to ensure that the Plan is able to liquidate investments to meets its pension benefit or other obligations. 

Foreign currency risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Plan primarily invests in financial instruments and enters into transactions denominated in various foreign currencies, other than its measurement currency. Consequently, the Plan is exposed to risk that the exchange rates of the various currencies may change in a manner that has an adverse effect on the value of the portion of the Plan's assets or liabilities denominated in currencies other than the Canadian dollar. 

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Plan. Credit risk is generally higher when a non-exchange traded financial instrument is involved because the counterparty for non-exchange traded financial instruments is not backed by an exchange clearing 

Interest rate risk is the risk that the market value of the Plan's investments will fluctuate due to changes in market interest rates. To properly manage the Plan's interest rate risk, appropriate guidelines on the weighting and duration for the bonds and other fixed income investments are set and monitored. The Plan's investments in fixed income are sensitive to interest rate movements.