43 24 Financial instrument risk The Law Commission’s activities expose it to a variety of financial instrument risks, including market risk, credit risk and liquidity risk. The Law Commission has a series of policies to manage the risks associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions that are speculative in nature to be entered into. Market risk The interest rates on the Law Commission’s investments are disclosed in note 16. Fair value interest rate risk Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Law Commission’s exposure to fair value interest rate risk is limited to its bank deposits which are held at fixed rates of interest. Credit risk Credit risk is the risk that a third party will default on its obligations to the Law Commission, causing the Law Commission to incur a loss. Due to the timing of its cash inflows and outflows, the Law Commission invests surplus cash with registered banks. The Law Commission’s maximum credit exposure for each class of financial instrument is represented by the total carrying amount of cash and cash equivalents (note 7), net debtors (note 8) and term deposits. There is no collateral held as security against these financial instruments. The Law Commission has no significant concentrations of credit risk, as it has a small number of credit customers and only invests funds with registered banks with specified credit rating. Liquidity risk Liquidity risk is the risk that the Law Commission will encounter difficulty raising liquid funds to meet commitments as they fall due. In meeting its liquidity requirements, the Law Commission maintains a target level of investments that must mature within specified timeframe All creditors and other payables are due for settlement within