11/ Contingencies RECO is involved in various claims and litigation both as plaintiff and respondent. In the opinion of management, the resolution of these claims against RECO will not result in a material effect on the financial position of RECO. Any settlements will be reflected in the statement of operations if the likelihood of loss is more likely than not and the amount can be reasonably determined. Any awards will be recognized as the matters are resolved. 12/ Financial instruments The main risks to which RECO’s financial instruments are exposed are interest rate risk, market risk and credit risk. It is management’s opinion that RECO is not exposed to significant foreign exchange risk or cash flow risk. A/ INTEREST RATE RISK Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in market interest rates. RECO is exposed to interest rate risk through its short-term investments. RECO’s primary objective with respect to its investments in short-term investments is to ensure security of principal amounts invested and provide a high degree of liquidity. B/ MARKET RISK Market risk arises from the possibility that changes in market prices will affect the value of the financial instruments of RECO. RECO manages its risk by investing only in highly liquid and short-term GICs. C/ CREDIT RISK Credit risk is the risk of an unexpected loss if a counterparty to a financial instrument fails to meet its contractual obligations. Financial instruments that potentially subject RECO to credit risk consist principally of cash and short-term investments. RECO places its cash and short-term investments with high-quality institutions to mitigate this risk. RECO is exposed to credit risk on accounts receivable from OREA. RECO’s accounts receivable risk is considered to be low, as receivables are recognized only if it is reasonably certain the monies will be received. 13/ Comparative information Certain comparative information has been reclassified to conform with the financial statement presentation adopted in the current year. The reclassification has no effect on previously reported results or net assets. INDEPENDENT AUDITORS' REPORT/RECO 2017 ANNUAL REPORT /61