The information included in the notes for financial instruments is useful in estimating the extent of risks relating to both on-balance and off-balance financial instruments.

Royal Ahrend’s primary financial instruments, not being derivatives, serve to finance Royal Ahrend's operating activities or directly arise from these activities. Royal Ahrend also enters into transactions in derivatives, particularly forward currency contracts and interest rate swaps, to hedge foreign exchange and interest rate risks arising from Royal Ahrend’s operating and financing activities. Royal Ahrend’s policy is not to trade in financial instruments for speculation purposes. The principal risks arising from Royal Ahrend’s financial instruments are foreign exchange risk, interest rate and cash flow risks, other price risk, credit risks and liquidity risks. 

Royal Ahrend's policy to mitigate these risks is set out below.

Royal Ahrend is exposed to foreign exchange risks arising from purchase and sales transactions denominated in a currency other than Royal Ahrend’s functional currency. Royal Ahrend’s policy is to hedge foreign exchange risks by entering into forward currency contracts by assessment of Royal Ahrend's management. Ultimo 2025 the outstanding forward currency contracts relate to EUR/CNY and EUR/USD forward contracts. For EUR/CNY and EUR/USD contracts cash flow hedge accounting is applied as described in the accounting policies. At 31 December 2025, forward exchange contracts are outstanding with a total positive fair value of €66K. The effective portion of the fair value changes is recognised in equity in the cash flow hedge reserve. No hedge ineffectiveness was recognised in the income statement during 2025.

All other forward currency contracts were settled before year-end or had an immaterial fair value. 

Currency risks regarding net asset investments in foreign currencies are not being hedged.

Interest rate risk is the risk of the fair value of future cash flows from financial instruments fluctuating due to changing market interest rates. The risk of market rate fluctuations run by the Royal Ahrend group mainly relates to Royal Ahrend’s variable-interest long-term commitments. The interest rate risk on the bank loan is hedged via an interest rate swap with a cap at 3,48%. Refer to “Liabilities to credit institutions”. Ultimo 2025 Royal Ahrend has no other derivatives to cover risks for interest rate or cash flows.

Royal Ahrend chose to have a significant part of her funding as short-term, which enables the company to adjust to its financing needs in a flexible manner. The interest rate risk involved with short-term debt is not hedged.

Royal Ahrend trades only with creditworthy parties and has implemented procedures to check the creditworthiness of parties. Royal Ahrend has also drawn up guidelines for limiting the credit risk associated with each financial institution and debtor. Furthermore, Royal Ahrend applies strict credit control and dunning procedures. Royal Ahrend’s credit risk is minimal due to the above measures. No significant concentrations of credit risk exist within the Royal Ahrend group.

Royal Ahrend manages liquidity risk through short term monitoring and by making adjustments where necessary. A cash pool is applicable throughout the Royal Ahrend group optimising group cash positions. For details of the liquidity risk relating to interest rate swaps, please refer to the note on interest rate swaps. For details of the credit facility made available and the related covenants, please refer to the notes on liabilities to credit institutions.

Transactions between related parties are affected at arm’s length conditions. There are no specific related parties’ transactions to report.